Public Finance Module 1 PDF

MODULE 1 Lesson 1: Role and Scope of Public Finance “The reason why most people never reach their goals, is that they don’t define them. Winners can tell you where they are going; what they plan to do along the way and who will be sharing the adventure with them”...

MODULE 1 Lesson 1: Role and Scope of Public Finance “The reason why most people never reach their goals, is that they don’t define them. Winners can tell you where they are going; what they plan to do along the way and who will be sharing the adventure with them” ==Dennis Waitley==  INTRODUCTION Fin 112 (Public Finance) is an elective subject in Financial Management Program. It is therefore necessary that the students must be provided with a simple presentation and adequate knowledge and a clear understanding on the role, scope and development of public finance, the theories & practices of government spending; the ways and means of raising government revenues; the reasons why the government should manage its public debts; and the direction and effects of raising and spending government funds. Likewise, it deals with the concepts, principles, theories & systems of budgeting as well as the mechanics of government budgeting. “Either you run the day, or the day run’s you” ==Jim Rohn== ENJOY YOUR MODULE...  ABOUT THE MODULE This module only has one (1) lesson. It is all about the role and scope of public finance, difference of public and private finance and the like. This module contains task like pre-test and post-test that you need to accomplish. Likewise, activities like self-test should also be accomplished to measure your knowledge you gained in the module. BUT BEFORE YOU GO WITH THE MODULE here are some of the things to remember: ICONS TO REMEMBER: Means WHAT TO DO (PRETEST/POSTEST). You need to answer it before reading the lessons. This will measure your understanding/knowledge on the topic before you take the lesson. KEY TO ANSWERS. This will lead you to the answers on the different task or activities on the module. LESSON. You will encounter this icon whcih leads you to the lesson proper/topic for this module. OBJECTIVES. This icon means the Learning objectives of the course. You will encounter this icon every module. SELF TEST. You will encounter this icon every end of the module. Answer it and this will measure the knowledge that you gained in the module.  ABOUT THE AUTHOR AND CO-AUTHORS CORAZON B. URBIS, MPA Program Chair, BSBA FM Prof. Corazon Urbis is a Bachelor of Science in Business Administration Major in Banking and Finance graduate. She had finished her academic requirements in Doctor in Business Administration and a graduate of Master in Public Administration at University of Northern Philippines. Prof. Urbis was the Disciplinal Chair of BSBA-FM Program at College of Business Administration and Accountancy from June 2008 to present. She was also a College Secretary from November 14, 2011 to May 7, 2013. Prof. Urbis was a Coordinator in Business, Economics and Cooperative at College of Business Administration and Accountancy from July 2007 to August 23, 2011. She was once a Disciplinal Chair of Cooperative Management Program from year 2001 to July 2004. And lastly Prof. Urbis was a Coordinator of the General Operations of CBAA Cooperative Laboratory from year 200 to July 2004. Prof. Urbis is an active member of the Accrediting Agency of Chartered Colleges and Universities in the Philippines (AACCUP), Confederation of Faculty Association in State Colleges and Universities in the Philippines (CDASCUP); a member of Entrepreneurship Educators Association of the Philippines Inc., Philippine Council of Deans and Educators in Business (PCDEB); Regional Association of Business Educators Region 1 (RABE1); Council of Management Educators and Practitioners in the Philippines (COMEPP); Council Management Educators (COME); UNP Faculty Union from August 2016 to present, UNP- FULAP from October 2019-present and UNP Federated Alumni Association. Currently, Prof. Urbis is the Program Chair of BSBA Financial Management and the Treasurer of UNP Faculty Union. KATHERINE ALON - RABBON, MBA Faculty Member, CBAA Prof. Katherine A. Rabbon is a Bachelor of Science in Business Administration major in Financial Management graduate. She had finished 21 units in Doctor in Business Administration and a graduate of Master in Business Administration in 2018. Prof. Alon is an active member of the Junior Confederation of Finance Association Philippines (JCFAP), Asian Qualitative Research Association, Entrepreneurship Educator’s Association of the Philippines, Inc.; State Universities and Colleges Teachers Educators, Asia Pacific Network for International Educational Education and Values Education (APNIEVE), she is also a member of the UNP Faculty Union and UNP-FULAP from 2018 to present. She was also the adviser of Junior Bankers Association - the Accredited Organization of Financial Management from 2018 to present. Prof. Alon is inclined to running, mountain biking, badminton, hiking, waterfalls chasing and travelling. Her recent achievements were when she conquered the traverse trails of Mt. Apo at Davao City last November 2017 and Mt. Fuji at Japan last July 2019. ENGELBERT E. CASIMIRO, BSBA FM Faculty Member, CBAA (PT) Mr. Casimiro is a graduate of bachelor of Science in Business Administration major in Financial Management. He is a civil service 2nd level eligibility or professional level passer. Mr. Casimiro is now a part-time faculty under the Financial Management Program and is teaching both major and minor subjects.He Is very much interested in financial updates of the Philippines and loves reading books.  GENERAL GUIDELINES It is important that you must read all documents (e.g. syllabus, assignments) to be familiar with course expectations. On-line attendance is expected, however, late logging into the Learning Management System of students is considered. You are expected to observe internet etiquette at all times they access the net. The promotion of a safe online community is expected both from the students and faculty. Online academic integrity should be observed at all times through honest and transparent assessment. Mechanics of assessment tasks such as graded question and answer, formative test and essay will be provided during the lecture. Any form of assessment will be given during and after the online discussion. You are not required to post photographs and other personal information on the course site. Student(s) with special needs and concerns with technology/software application will be given consideration. Moreover, the student may be assisted by his/her parents/relatives who have the capacity to do such. Likewise, you should take the examinations given within the period it will be given via on-line or face to face. If you fail to take the examination, he/she should notify the faculty concern the reason(s) for failure to take the examination. All assignments are expected to be done individually. You are given 7 working days to submit your outputs after the announcement of the assigned tasks/activities. Assignments may be submitted through the Facebook messenger, yahoo and google accounts using their last name/first name/middle name/assignment code as the filename. Assignment code will be provided by their own instructor/professor. You are expected to watch/download the videos/PowerPoints/files that are attach on some topics for additional information and notes. You should submit all the necessary requirements via on-line or other modes (courier). You should acquire or obtain the needed materials like books, manuals and links from various sources. Likewise, you have the responsibility of maintaining the security of their usernames, passwords, and personally identifiable information. The instructor/professor shall have the following responsibilities: Orient you regarding the use of software applications to enable you to clearly understand what to do. The monitoring of your attendance and participation will also be done in order to track objectively their individual performance. Prepare the power point presentations, modules/manuals, activities before the delivery should be done before hand so as to deliver the lessons very well. Report untoward incident in the cyberspace to higher authorities will be for disciplinary actions. Grade and record all student performance objectively via on-line or any other modes in order for the students to track their individual performance, lacking and the like. Ensure students receive accurate, sufficient and up to date class performance via on-line or other modes. Likewise, the teacher must develop or adopt appropriate materials, assessments, exercises, and any other helpful resources that will assist in developing a supportive learning community.  Lesson I: THE ROLE AND SCOPE OF PUBLIC FINANCE A. Introduction Public Finance, from national to local governments, is a vital aspect; it is considered the lifeblood for the conduct of government programs, projects and activities. The construction of roads and bridges, communication and power facilities both for home and industrial uses, educational and health services, peace and order and fire protection are traditional fields of activity which the government is expected to engage in. However, to enable the government to engage in these different activities, it has to raise revenue mainly through the imposition of taxes. Thus, this wide and ever growing influence of government in economic activities has naturally brought about much attention to the field of public finance. OBJECTIVES: At the end of the lesson, the students should be able to: Determine the nature, role, scope and function of public finance in the economy. Show understanding about how public finance affects the operations of the government. Discuss the function of fiscal policy in the Philippines Define Public Finance Differentiate Public and Private Finance B. What is Public Fiscal Administration? With the emergence of the field of public administration, much interest has been directed towards the political administrative and management aspects of formulating, implementing and evaluating fiscal policy, hence, the term public fiscal administration. Public Fiscal Administration = refers to the formulation, implementation and evaluation of policies and decisions on taxation and revenue administration; resource allocation, budgeting and public borrowing and debt management; and accounting and auditing. As a system, it includes the environment, structures, systems processes and personalities involved in formulating, implementing and evaluating fiscal policy. Fiscal Policy = refers to the mix of policies and taxation, expenditures and borrowings for the achievement of government objectives.  To better understand, watch the attached link below about 1) The Basics of Fiscal Policy, 2) COVID-19 Relevant Fiscal Policies under the Duterte Administration  https://www.youtube.com/watch?v=CZPgBZUS4YE  https://www.youtube.com/watch?v=G8uad2Dy34Q C. What is Public Finance? 1. Public Finance. It simply means collecting and spending of government’s funds. It covers the whole gamut of fiscal administration including tax collection, expenditures of government funds, preparation of the annual government budget, securing foreign and domestic loans and the floating of bonds. (by Abletez, J.P. and R.B. Chua, “Local Finance and Budgeting”) 2. Public Finance. It is the study of facts, principles, techniques and effects of obtaining and spending funds and managing public debts. ( by Schaultz & Barris, “American Public Finance”) 3. Public Finance. It is that part of economics that deals with the revenue and expenditure patterns of the government and their effects on the economy. (by Romualdez, et al., “Philippines Public Finance”) 4. Public Finance. It is concerned with the utilization of the combined use of public expenditure, taxation and public debt so as to achieve economic objectives: (by Sicat, “Economics”) a) Reduction of the Wild Swings of the Business Cycle. This means that during expansion, the government should spend less and tax more, however, in times or recession, the government should spend more and tax less. b) Stable Growth of Income. This could be attained through increased employment and equitable distribution of income/wealth. D. Why do we study Public Finance? The presence of a political body that governs a given economy requires a study of public finance, because the government, throughout its existence, will have to raise revenues and spend them, both of which, can substantially affect the economy.  To better understand, watch the attached video and follow link below.  https://www.youtube.com/watch?v=woEbFctsejo E. Private versus Public Finance: The basic goal in both the private and public economy is the same, that is, the satisfaction of human wants. They are both engaged in the production, distribution and consumption of goods and services. However, they have several major points of distinction. 1. Difference between Private and Public Finance. Here, public finance deals with public wants while private finance relates to private wants. Private wants = are those wants that can be satisfied through the mechanism of the market because their enjoyment or satisfaction can be made subject to price payments. Here, the Exclusion Principle is applied. Exclusion Principle = holds that a person is exempted from the satisfaction or enjoyment of a particular commodity or service if he can’t afford or is not willing to pay the designated price to the seller. Public Wants = are those wants that cannot be satisfied through the mechanisms of the market because their enjoyment by an individual consumer is independent of his payment of contribution. Therefore, one is not excluded from the satisfaction of a public want even if he does not pay for it. 2. Financial Means Available Private Finance = the private economy can avail itself with the necessary funds needed to undertake its operations through the issuance of marketable securities (such as bonds or stocks) or it can utilize its income or others assets. Public Finance = the public economy can avail itself with the necessary funds needed to undertake its resources through: a) taxation c) public borrowing b) printing of money d) sale of public assets & services 3. Budgetary Procedure Private Economy = the private economy starts the preparation of the budget from the income side, that is, it determines first its possible income and additional resources before determining its individual expenditure items. Public Economy = the public sector or the government sector starts the preparation of the budget from the expenditure side, that is, it determines first its expenditure needs before it looks around for possible ways of financing those expenditures. Budgeting = the process of bringing together estimates of anticipated revenues and proposed expenditures implying the schedule of activities to be undertaken and the means of financing those activities.  To better understand public and private finance, watch follow the link below. And read the additional supplementary reading material.  https://www.youtube.com/watch?v=NJY6P7t-yD0  http://rapodar.ac.in/pdf/elearn/private%20and%20public%20finance.pdf  http://www.differencebetween.net/business/finance-business-2/difference- between-public-finance-and-private-finance/ F. An Overview of the Fiscal Functions: 1. The Allocation Function = refers to the provision of public or collective goods. These are goods or services that are socially desirable but which ordinary business firms cannot be expected to provide in desirable amounts. 2. The Distribution Function = refers to the correction of perceived injustices in the distribution of wealth in society. This means taking from the well-to-do and improving the conditions of the less-to-do. 3. The Stabilization Function = this involves the combat against unemployment and inflation, and provision for increases in the standard of living for the citizenry. G. The Changing Role of Government in the Economy: An economy that works under a basically free enterprise system generally to attain the following objectives. 1. To strengthen economic freedom = to provide the framework within which consumers’ choice is respected, competition is maintained, and where can free markets operate. 2. To promote over-all economic efficiency = the government should have the capacity in a balance and responsive production with the supply of each of government services should conform to same principles of least cost and allocative efficiency as does private production. 3. To promote economic growth = refers to the improvement of standards of living through an increased per capita real income. It implies the enhancement of the economy’s capacity to produce goods and services needed by the general public. 4. To promote economic stability = the maintenance of and acceptable rate of economic growth and without generating substantial involuntary unemployment and upward-downward movements in the general price level. 5. To improve economic security = the fundamental result in the attainment of the above-mentioned objectives. CONGRATULATIONS FOR FINISHING THE FIRST MODULE NOW YOU CAN PROCEED TO THE SECOND MODULE End of Module 1 REFERENCES Briones, Leonor M., Philippine Public Fiscal Administration, (Volume I and II) 2nd ed., Mandaluyong City, Philippines: Fiscal Administration Foundation, Inc., 2006. Tendero, Avelino P., Theory & Practice of Public Administration in the Philippines , 2nd ed. Fiscal Administration Foundation, Inc. (FAFI) 2008.