INTRODUCTION
Financial management constitutes the most crucial and central aspect in the administrative process of the local government system. This is due largely to the fact that finance determines the amount of services, development and quality of personnel provided by the local government.
However, the amount of revenue available to the local government and its accountability makes for efficient and effective local government system. Financial and its management is a sensitive area in governments and its strictly governed and guided by the elaborate rules, regulations and guidelines. Apparently budgeting in the central activity in financial management, it includes the details of the government anticipated revenue and expenditure for a fixed period machinery for development and total governance in the local government administration. It equally in skills a level of financial display on the leadership, executive and performance evaluation.
Furthermore, it is believed that financial management held the project of activities. In addition and embezzlement associated with the local government system.
Equally, financial management induces the demand for policy, expenditure in the planning and policy adjustment in local government. It is clear that almost every local government system possess weak financial base. Actually, the local government requires huge financial resources in order to provide its finances, amphfies their problems. Thus, the low internal revenue generation in our government appears to be a very wide problem. Local government accounts are not to mobilize effective revenue and led to poor implementation of the budget deficit and debt burden.
BACKGROUND OF THE STUDY
Finance is the fuel of any form of administration, either private or public. At the local
government level, it constitutes the lubricants for the wheel of good administration. According to
Aborishade and Marshall (1981) cited in Hassan (2011), finance is a thread that runs round the
cloth, if the thread is pulled wrongly at one end, it will affect the design of the cloth and destroy
its beauty. Therefore,
finance in any organization must be handled with care and must be
disbursed according to laid down rules and regulations. A sound financial administration is the
core of good efficient, effectives and equity which are the guiding principles of financial
management. Efficiency is the ability to achieve maximum results at minimise cost,
effectiveness deals with expenditure relevance in meeting the management objectives, while
equity ensures justice and fair play in all management activities. The overriding factor in local
government financial management is the basic operation of financial services in a competitive,
efficient and cost effective manner. Besides, the efficient management of local government
finances is constrained by the political impunity of state governors and this has undermined
grassroots developments (Otinche, 2014). Financial administration which is the crux of financial
management is the art and science of financial planning, coordinating, organising and
evaluating of local government financial resources in order to achieve the best objectives, goals
and performance targets. The objective of financial management in Local Government aligns
with the three components highlighted above. Olowe (2011) defined financial management as
the management of business finance in order to achieve business or organisation objectives.
The word management connotes planning, coordinating, controlling and monitoring
organizational financial resources. At the Local Government level, financial management is the
appropriate steps taking to ensure proper revenues generation and further utilisation of such
financial resources in line with Local Government objectives, goals and citizen’s expectation.
CONCEPT OF FINANCIAL MANAGEMENT
Financial management is the management of finance in order to
achieve the objectives of management. It involves all functions concerned with revenue
generation and use of such financial resources for the attainment of the local government
objectives. Akinsulire (2019) stated that financial management involves the use of accounting
knowledge, economics models, mathematical rules, systems analysis and behavioural science
for assisting management in its management functions of financial planning, control and
management. Financial management draws on related subjects such as financial accounting,
management accounting, economics, law, quantitative techniques and behavioural science.
According to Pandey (2005), financial management is the managerial activity concerned with
planning and controlling of the firms or organization financial resources. Finance is the life blood
of any organisation, this required to be managed for the success of an organisation. Therefore,
Banerjee (2009) opined that financial management involves systematic efforts of management
devoted to the management of finance needed for all organisational activities. This involves
sources of fund and employment of such in various areas of organization for the attainment of
organisation objectives. Hassan (2011) stated that financial management tends to be beneficial
only when activities are properly planned and executed. It is a whole system to the extent that
when a unit of it is defective, the whole structure becomes defective. Financial management in
local government entails revenue generation, fund allocation, resources administration and
treasury management.
Financial management according to Akinsuli (2002) states that financial management connotes responsibility for obtaining and effectively utilizing the funds necessary for the operation of an enterprise.
He went ahead by saying that financial function centres around the management of funds Specific purpose of assisting management in its function of financial planning and control. In conclusion, the financial manager needs to have a good knowledge of financial accounting, management accounting, law and economics in order to discharge his functions as required effectively.
According to Oye (2002) there are core decision areas in financial management which are investment decision, financing decision and dividend decision.
- Investment Decision: It involves and identification of viable projects i.e. it used to finance the projects. Like cost associated with each source, the characteristics of each source.
- Dividend Decision: In this case, the attention is focused on the compensation required by the providers of funds, i.e this is the determination of the appropriate amount to be paid as dividend and the profit that could be ploughed back to finance in the local government.
