GSM 5400: FINANCIAL MANAGEMENT

LECTURER: MADAM NUR LALUA RASHIDAH MOHD RAHSIAD

INDIVIDUAL ASSIGNMENT: A FRAMEWORK FOR FINANCIAL MANAGEMENT
AND CONTROL
NAME MATRIC ID
VIVEKSARATI A/L SANDRASIGARAN PBS1311014
Summary
Financial Management and Control is a comprehensive system of internal controls put in place
by and under the responsibility of budget user heads, which, by way of managing risks, provides
reasonable assurance that budget and other resources will be used in a regular, ethical,
economical, effective and efficient manner towards the achievement of objectives. This means
that they will be used in keeping with laws and other regulations, safeguarding the assets and
resources against loss, abuse and damage. n simpler terms, Financial Management and Control
may be defined as a ss!"# $%&'% (&)"'!s a*( '+*!)+,s !%" -&*a*'&a, "--"'!s +- ./(0"! /s")1s
+2")a!&+*s &* a $a !%a! #a3"s !%"# s/22+)!&4" +- !%" a'%&"4"#"*! +- +.5"'!&4"s.
Financial Management and Control covers all business transactions, and especially those relative
to!
"evenue
#$penditure
%sset
Commitments
Tendering procedures and contracting
"ecoveries of unduly and illegally spent budget resources
K" 2")s+*s $%+ a)" a''+/*!a.," for the way the system of financial management and control
functions and how efficiently include #a*a0")s6 especially the heads of budget users and heads
of individual organi&ational units within the scope of their authorities and responsibilities.
Those who are in charge of organi&ing the operations, proposing and making decisions as the
groundwork for conducting the activities need to be aware that they are accountable for!
The manner in which the operations are being managed
Financial effects arising from such operations
"isks associated with such operations
Control activities to be put in place and applied
'ngoing monitoring of the management system and its timely updating
%n organi&ational unit in charge of budget and finance shall be competent for coordinating the
activities relative to financial management and control at budget user level. Coordination of
activities related to financial management and control at the user level budget operationally is
implemented by organi&ational units in charge of finance. These (nits have task to support
managers to assume management responsibilities for financial performance. Systems of financial
management and control are founded upon five interrelated components of internal controls
which are detailed in the methodological framework for the implementation of financial
management and control which is an integral part of the )ublic Financial Management and
control implementation "ulebook. Methodological framework provides an overview of
activities, methods and procedures of financial management and control. *ithin the
methodological framework, budget users, taking into account numerous laws and regulations that
govern specific areas of business, but also their specific characteristics and special features in the
business, implement financial management and control.
+%) analysis in Financial Management and Control Framework
n the management literature, 0a2 a*a,s&s is the comparison of actual performance with
potential performance. f a company or organi&ation does not make the best use of current
resources, or forgoes investment in capital or technology, it may produce or perform below its
potential. This concept is similar to an economy,s being below the production possibilities
frontier. +ap analysis identifies gaps between the optimi&ed allocation and integration of the
inputs -resources., and the current allocation level. This reveals areas that can be improved. +ap
analysis involves determining, documenting, and approving the difference between business
re/uirements and current capabilities. +ap analysis naturally flows from benchmarking and other
assessments. 'nce the general e$pectation of performance in the industry is understood, it is
possible to compare that e$pectation with the company,s current level of performance. This
comparison becomes the gap analysis. Such analysis can be performed at the strategic or
operational level of an organi&ation.
+ap analysis is a formal study of what a business is doing currently and where it wants to go in
the future. t can be conducted, in different perspectives, as follows!
0. 'rgani&ation -e.g., 1uman "esources.
2. 3usiness direction
4. 3usiness processes
5. nformation technology
+ap analysis provides a foundation for measuring investment of time, money and human
resources re/uired to achieve a particular outcome -e.g. to turn the salary payment process from
paper6based to paperless with the use of a system.. 7ote that ,+%) analysis, has also been used
as a means of classifying how well a product or solution meets a targeted need or set of
re/uirements.
+ap %nalysis! 1ow to %void the Common )itfalls %ssociated with Change
%fter performing an "' or cost8benefit analysis, a company may choose to do a gap analysis to
determine ways in which it can improve upon e$isting practices. % gap analysis can help to
bridge the division between different disciplines within a business, such as customer services and
T9 at the same time, it can provide the perspective to advance your business well into the future.
t is often helpful to get an outsider:s perspective when conducting a gap analysis. %n outsider
may be better e/uipped to evaluate industry trends, and can provide helpful information
regarding the benefits of suggested changes. %n analyst can usually shed light on disaster
recovery recommendations, efficiency gains, and upfront costs, and can suggest enhancements to
help your organi&ation to do more with less. t is important to remember that for every
technology ;improvement,< the potential e$ists for processes to go horribly awry. t is possible
that a business will close a gap in technology infrastructure, only to discover that it has created
personnel gaps in which end6users do not have the e$pertise or training to use new technology to
its fullest potential. The temptation may be to incorporate /uick fi$es to preclude an investment
of both time and money. *ith this in mind, it is important to be aware of three major pitfalls that
can be associated with gap analysis!
0. Staying the course
'rgani&ations usually have a comfort &one. Fre/uently, they rely on older technology and
familiar operations for their key processes, without investing time or money to improve their
present systems. (sers are comfortable with the e$isting e/uipment9 conse/uently, transitioning
to a system with upgraded capabilities can be a challenge. "egardless of this comfort &one,
businesses need to dedicate the time and the resources to e$amine the big picture in order to
remain competitive. Focusing solely on day6to6day operations without considering ways in
which to make your system more efficient can be e$tremely harmful in the long run.
2. Treating the symptoms instead of the cause
t is important to have a thorough grasp of the organi&ation:s current capabilities -or lack thereof.
before implementation of any improvements. Companies risk failure if they do not initially
identify underlying reasons for their shortcomings. 'ften, businesses that are struggling with a
lack of system interoperability will build highly customi&ed pieces to address symptoms -in this
case, the inability for two systems to communicate. instead of underlying causes -the need to
upgrade an anti/uated system.. They end up paying for services and consulting fees to receive a
high number of customi&ations. (ltimately, they fre/uently end up with a customi&ed system that
they do not understand, and have difficulty adding additional software down the road. f
companies insist on addressing their issues solely with multiple customi&ations and do not
address fundamental underlying problems with their infrastructure, they often end up spending
the same amount of time and money as they would have on a complete systems overhaul.
4. Failure to look to the future
Typically, whether businesses are dealing with claims, student admissions, accounting, or other
types of processing, they use some sort of internal software as the driver for their processes. For
companies that are using anti/uated technology, the challenge is to somehow enable their current
system to communicate with other, more modern systems. *hen organi&ations rely upon older
technology, it is imperative that they close the gap=or at least consider the gap=between older
and newer technologies in order to support future add6ons. Merely customi&ing the present
system does not necessarily make it interoperable with future technologies.
% gap analysis is an important tool that can help an organi&ation to evaluate and implement
change successfully, which is a necessity in today:s business environment. "egardless of whether
you seek an outsider:s perspective for a gap analysis or hope to implement change based upon
internal input, a well6conceived plan can help to smooth your transition.
3ridging the +ap
dentify the gaps. The first step involves getting a clear picture of the current system.
>now what is implemented and how the technology is being used. Try to recogni&e and
articulate the problems with your e$isting system, and visuali&e a more efficient way to
accomplish your goals. *hat is the best way to move forward? Companies must budget
for change and determine at which point to implement that change. f you hope to
implement a more modern system within five years, make sure that future software
purchases have the ability to communicate with the proposed system.
@iscuss ways in which to proceed. %ssign a team of people from different departments
who will be affected by proposed changes, and encourage their participation in the
process. Consider including a consultant, or your vendor:s professional services team, so
that you have an outsider:s perspective. Talk about the problem, and the pros and cons of
suggested solutions. *hich people need to be involved? %s a team, talk about problems
that are associated with the gap and how to close it. t is helpful to have one decision6
maker who is not biased toward one particular department.
@etermine and communicate solutions. Create a project plan. Focus -as a team. on how to
move forward. 3ecause change usually re/uires a financial investment, it is helpful to
develop a timeline and a budget. Meanwhile, keep the users on board, communicate,
implement change gradually, and welcome feedback. Aou can have a smooth transition if
you are inclusive and encourage involvement.
@efinition of #nterprise "isk Management
% process, affected by an entity:s board of directors, management and other personnel, applied in
strategy setting and across the enterprise, designed to identify potential events that may affect the
entity and manage risks to be within its risk appetite to provide reasonable assurance regarding
the achievement of entity objectives.