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The focus of this module is almost entirely on the expenditure side of public financial management, looking at budgeting, accountability and the changes in financial management.

In professions across the public sector, whether medical, educational, legal, engineering or custodial, people are making choices about investments, about how to achieve efficiency, how to stay within budget and how to improve performance. Whether reluctantly or willingly, people are having to understand costs, budgets, financial statements about cash flows, and expenditures, even when they are not in accountancy.

There are also changes in what people are being held to account for. It is no longer sufficient to have accounts that show that money has been spent how governments intended. Politicians and the public want to know how well it has been spent, whether it has been used efficiently and whether it has achieved the purposes for which it was allocated.

To cope with these and other changes, the ways in which public finances are managed has had to adapt. In many countries, budgets and accounts are no longer concerned just with the cash allocated and spent but also with the resources used in providing services – capital resources and assets, as well as people and materials. The further away from cash accounting the systems get the less they look like our personal accounts and the more we need to learn about the relevant concepts to enable us to understand and run them.

Learning outcomes

By the end of this module, you should be able to:

  • understand how public budgeting fits into the macroeconomic framework
  • apply ideas about accountability to the production of various forms of account for public services and public money
  • understand how changes in public management require different forms of public accounting
  • read a budget and a set of national accounts and understand the differences between budgets and accounts in different jurisdictions
  • understand costs and different ways of measuring them and how costs are used in budgets
  • understand the budget process at national and sub-national levels and the techniques appropriate at different levels
  • apply budgetary control methods
  • use financial management to enhance the performance of public organisations
  • appreciate how public financial management interfaces with politics and political choices.

Study materials

Study guide

You will receive a looseleaf binder containing eight units. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Virtual Learning Environment.

  • Bergman A (2009) Public Sector Financial Management. London, Prentice Hall Financial Times.
  • Shah A (Ed.) (2007) Budgeting & Budgetary Institutions. Washington DC, World Bank.

You will receive Reader volumes as part of the module materials, which consist of articles contributing to current debates in PFM. In addition, you will also use case studies and exercises in PFM in a variety of contexts.

Virtual learning environment

You will have access to the VLE, which is a web-accessed learning environment. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.


Budgeting and accounting

In this interview, Fred Mear discusses with Norman Flynn the impact that the economic crisis has had on budgeting and in particular on MTEFs, how choices are made between cash and accruals in terms of planning, budgeting and accounting, and whether budgets should be constructed according to line items or in terms of programmes.

Download audio

Module overview

Unit 1 The Context of Financial Management
  • 1.1 Introduction
  • 1.2 What is a Budget?
  • 1.3 The Macroeconomic Framework
  • 1.4 Accountability
  • 1.5 'New Public Management' and Financial Management
  • 1.6 Conclusion
Unit 2 Budget Coverage, Classification and Structure
  • 2.1 Introduction
  • 2.2 Coverage of the Budget
  • 2.3 Classification of the Budget
  • 2.4 Budget Composition
  • 2.5 The Line Item System vs Programme Systems
Unit 3 Costs
  • 3.1 Some Definitions of Cost
  • 3.2 Costing Systems
  • 3.3 Cost-Volume-Profit Model
  • 3.4 Absorption or Full Cost Recovery
  • 3.5 Activity Based Costing (ABC)
  • 3.6 Managing Costs
  • 3.7 Price-Based Costing
  • 3.8 Relevant Costs
Unit 4 Accounting and Budgeting: National Level
  • 4.1 Approaches to Public Accounting and Budgeting
  • 4.2 Cash Accounting vs Accruals Accounting
  • 4.3 The Macroeconomic, Fiscal Framework and the Medium-Term Expenditure Framework
  • 4.4 The Role of the Ministry of Finance
  • 4.5 Budget Timetable
Unit 5 Accounting and Budgeting: Sub-National Level
  • 5.1 Translating the national budget into operational budgets
  • 5.2 Structure, Performance, Discretion, Block Grants and Contracts
  • 5.3 Fund Accounting
  • 5.4 Resource Accounting and Budgeting
  • 5.5 Which Techniques at Which Stage?
  • 5.6 Budget Timetable at Sub-National Level
  • 5.7 Accounting for Services Provided by Third Parties
Unit 6 Budget Execution
  • 6.1 Introduction: Budgetary Control
  • 6.2 Controlling Operations
  • 6.3 Monitoring Budget Execution
  • 6.4 Taking Action
  • 6.5 Summary
Unit 7 Financial Management and Performance
  • 7.1 Introduction: Accruals Accounting and Output and Outcome Budgeting
  • 7.2 Defining and Measuring Non-Financial Items, Especially Outputs and Outcomes
  • 7.3 Case Study 1: Output and Outcome Definitions
  • 7.4 Output and Input Budgets
  • 7.5 Case Study 2: Outcomes and Outputs in Budgets in England
  • 7.6 Case Study 3: Performance Budgeting in Canada
  • 7.7 Conclusions: Will Performance Management and Budgeting Ever Be Fully Implemented?
Unit 8 Budgeting and Democracy: Conclusions
  • 8.1 Introduction
  • 8.2 National Legislatures and the Budget Process
  • 8.3 Case Studies - the USA, the Netherlands and Brazil
  • 8.4 Conclusions on Budgeting and Democracy
  • 8.5 Is There a Single Best Method of Financial Management?
  • 8.6 Review: The Journey from Bureaucracy to NPM as it Affects Public Financial Management
  • 8.7 Is PEFA the Answer?

Tuition and assessment

Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.

You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 5, and the second assignment at the end of the module, on the Tuesday after Week 8. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.

You will also sit a three-hour examination on a specified date in September/October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in April each year.

Module sample

Click on the link below to download the module sample document in PDF.