department of finance

department of finance

The Importance of Financial Management in the Department of Finance

1. Introduction

The Department of Finance (DoF) of the constituent entities of the Russian Federation is a key element of the budgetary system. This is explained by the extensive powers of the head of the Department of Finance in the field of municipal finance management defined at the legislative level and the specifics of state finances in the Russian Federation. Responsibility for making legal and effective financial decisions, creating conditions for the socio-economic development of the region, lies on the head of the DoF, as well as on the ofman-coordinators. In this context, the study of financial management in the DoF and of managerial decision-making based on an analysis of the performance of the relevant territorial structures is especially relevant.

The Department of Finance (DoF) is the first in the hierarchy of departments with a nationwide scope. It plays an important intermediary role, as the head of the DoF reports to the country’s finance minister and the DoF is responsible for interacting with all subordinate territorial offices throughout the country. Representing the DoF in a separate territorial office structure, the official for organization of financial management and accounting of the DoF (hereinafter referred to as ofman-coordinators) perform a number of complex tasks related to the financial support of various types and categories of budgetary activity participants, which necessitates a systematic approach to the organization and assessment of the effectiveness of the management of the DoF as a whole.

2. Role of Financial Management in the Department of Finance

This paper aims to enhance the importance of government financial management. It highlights five key reasons for enhancing importance and promotes the establishment of consciousness within the Department of Finance. This includes creating an environment and strengthening self-limiting abilities. These efforts can encourage healthy and continuous development of the public finance department and contribute to the creation of a harmonious finance system in the country. The paper also provides a few generally applicable and simple methods for improving theory and offers more meaningful strong points for improving practices. The goal is to promote the level of theory and generalize the application of these methods to improve practical implementation. By doing so, we can support the practical level based on consciousness and push the public finance department to navigate through economic conjunctures in a healthy and continuous manner.

The bankruptcy of the Department of Finance can come directly from financial risks. For the public financial system, the risks mainly originate from finance itself. To develop finance, the first step is to strengthen risk management and incorporate risk control into finance. It is important to deeply implement and accelerate the perfection of risk control within financial management and financial risk supervision. This will help safeguard the healthy and sustainable development of finance. The Treasury, as the administrative institution for finance, has important functions in business performance and finance management. It is also one of the important aspects of gradually perfecting the modern administrative system of socialism and realizing transparency, participation, and restriction in public finance integration.

3. Key Principles for Effective Financial Management

• Closely monitoring economic developments and trends, and also the likely impact on the financial prospects of public finance for the year and through to the completion of the annual budget. Publish and regularly update detailed and consistent macroeconomic forecasts which will be used in the compilation of the annual budget, the medium-term framework of fiscal policy, and the execution of financial operations for the year. Information shall be compiled in a timely manner in a coherent position to be approved by the relevant commission. And it will be assessed with the development of the financial implications for the remaining period of the year, given the previous trend of public finance and the actions in the current budget.

• Implementing the recommendations of the Audit Office of the Republic, including actions taken to comply with the findings of such recommendations.

• Ensuring personnel have the necessary skills and abilities to effectively implement financial management.

• Ensuring reliable, efficient, transparent audit and control under the Financial Inspection Directorate of all financial transactions and ensuring the best use of the Department’s financial resources.

• In managing the budget for all activities undertaken, and in ensuring compliance with all financial legislation and regulations, provisions of the Financial Rules and Regulations and the Regulations which accompany the Directives and Rules of the European Union must be observed.

• All decisions and actions with financial implications or having an impact on the Department’s financial interests must be within the existing legal framework and the rules and regulations governing financial management by the Government of the Republic of Cyprus and the European Union.

Key principles for effective financial management are the following:

4. Strategies for Financial Planning and Budgeting

The benefits of using a multiyear financial plan are that it provides a longer planning horizon, consistent with an organization’s mission and strategic plan, allows time for necessary adjustments or exit strategies, provides a basis for more feasible and realistic budget development, and assists in the allocation and use of resources in a cost-effective manner. The typical recommendations from experts in the field for successful financial planning and budgeting are to: acknowledge the need for change, use fair and consistent budgeting processes that are data-driven, differentiate fund management and align with the mission and strategic priorities of the organization, develop an annual budget as well as a multiyear plan, match resources with the mission for educational programs, involve all campus constituencies, plan for accountability for the use of resources by linking all budget requests to the institution’s mission and strategic priorities, apply technology so that decision makers have easy access to information, develop contingency and exit strategies to deal with changes, reduce costs effectively, create new revenue streams, and do so without compromising the organization’s integrity, use policy development as an integral part of overall strategic planning and budgeting efforts, economize current resources.

The term financial planning can be defined as “thinking about, planning for, and setting forth strategies for making the organization financially sustainable.” Furthermore, the term strategic financial planning is “a comprehensive assessment and plan that integrates the institution’s financial functions (e.g., capital and operating budgets, financial aid, advancement, debt management, facilities planning and management) and educational effectiveness to support the institution’s mission and size.” Budgeting also is part of the planning process and may be defined as the process of planning, developing, implementing, monitoring, and evaluating the use of financial resources for the purpose of achieving an agency’s mission and objectives. Most experts in the field believe there are two strategies for financial planning and budgeting, called the top-down and bottom-up approaches. The top-down approach involves individuals within the system who have the authority to make decisions regarding the budget, and the budget is passed down to those working at the lower levels. The bottom-up strategy begins at the lowest levels within the system, and individuals working at these lower levels ascertain how the organization will use its resources and then provide feedback to the upper levels for final approval.

5. Conclusion and Recommendations

In conclusion, the main question of this mini research project was ‘what is the importance of financial management in a government department?’. According to all the information, research, documents and result of the personal interviews, the following general conclusions could be drawn. The Department of Finance can be improved by motivating the staff that have the capability and capacity to work with numbers, including the finance team, as a priority in the organization. Providing regular continuous training is important for the personnel involved with finance transaction handling to keep abreast of the new and changing divisional needs related to finance management.

• Performance monitoring committees, financial consultants, policy direction and intervention, and different projects are some of the actions taken by the Department of Finance to enhance the capability of finance staff. • To improve the system for managing the budget, there should be capacity-building sessions for important decision-makers, and regular review sessions on the roles and responsibilities in the expenditure and cash management processes should be conducted. • Responsibility for managing finances should be assigned to all clusters of the Department to ensure that finance-related functions are conducted fairly, and as often as possible and necessary. The focus should be on upscaling the Department’s capacity to manage all financial transactions. • The functioning of Finance Personnel in the procurement chain requires development since finance is viewed as thorough audit reports. Justifications and supporting documents from financial personnel should be draft assessment plans and monthly budget spokesvisions for the audit team. • The Performance and Monitoring Evaluation (PME) Tool is designed to suit PME monitoring and reporting. Data on performance and monitoring evaluations should be produced continuously and validated information should be utilized in a systematic way to improve management systems and organizational processes through performance analysis and reports by the Department Management.

This study focused on the importance of financial management in the Department of Finance. Considering the results, it was found that the Department has failed to manage its finances effectively. Based on the results and discussion, the following recommendations are hereby broken down per department: