Concept of Financial Administration

Financial Administration:

Finance is the lifeblood of every organization. Personnel and materials which are needed for the functioning of any office can be made available only if finance is provided. “No Finance, No Administration.” It is an old saying but the truth it contains is eternal. Finance and administration are so inter-mixed that neither of the two can have utility without the other. The efficiency of operating and maintenance systems depends upon the effectiveness of the financial system at its back, as every administrative act has a financial implication, direct or indirect. The significance of finance for public administration can be assessed from the famous observation of Lloyd George: “Government is Finance.”

Financial Administration, as an important aspect of public administration, is as ancient as the organized government of a state. Ever since the origin of the state, the treasury has always been one of the most important parts of the administration. Kautilya in his “Arhashastra” observed: “All undertakings depend on Finance. Hence, the foremost attention shall be paid to the treasury. The practice continues to be present even today. In every parliament, a government is always referred to as the treasury bench. The Finance Minister and the Finance Department always enjoy a pivotal place in the government and its administration.

A modern state is always conceptualized as a public welfare state. It can accomplish its objectives only with the help of finance and only through a well-organized and efficient system of financial administration. The importance of financial administration can also be judged from the fact that in contemporary times, the legislature of the state is always regarded as the custodian of national finances and it exercises control over the executive by controlling and effectively supervising the financial administration. Ity passes the budget, reviews the audit reports, and uses several committees, like the Public Accounts Committee and the Estimate Committee, etc., for carrying out these objectives.

Meaning and Definition of Financial Administration:

The term “Financial Administration” consists of two words viz. “Finance” and “Administration”; the former refers to monetary resources and the latter to the organization and management of collective human efforts in the pursuit of a conscious objective. Taken together, Financial Administration means the set of activities that are related to making available money to the various branches of an office, or an organization with a view to enable it to carry out its objectives. Like the blood in the human body that circulates through a network of arteries and veins and is controlled by the heart, there is a network of financial channels spreading throughout the administrative machinery which is controlled by a central financial agency. Together, these constitute the Financial system of the state. The way it is organized and operationalized is popularly known as Financial Administration. The Financial System is a sub-system of the administrative system which is in itself an integral part of the political and socio-economic systems functioning within the national and international environments.

In simple words, we can define Financial Administration as the system of collectively preserving and distributing public money or public funds.

(1) L. D. White uses the term fiscal management for defining Financial Administration. He observes, “Fiscal Management includes those operations designed to make funds available to officials and to ensure their lawful and efficient use.”

(2) In the words of Jaze Gaston, “Financial Administration is that part of government organization which deals with the collection, preservation, and distribution of public funds, with the coordination of public revenue and expenditure, with the management of credit operation on behalf of the state and with the general control of the financial affairs of public households.”

(3) According to G. S. Hall, “Financial Administration is concerned with all aspects of financial management of the state.”

On the basis of these definitions, it can be observed that Financial Administration includes all such activities as generate, regulate, and distribute monetary resources needed for the sustenance and growth of the members of a political community. It is the system of administering public funds. It involves collection, preservation, and distribution of the funds.

Scope of Financial Administration:

Importance of Financial Administration:


To conclude, we can say that all societies have their financial systems which are integral components of their respective public administrative systems. Financial Administration has now started assuming a multifaceted role in every modern society. Its primary objective has come to be the maximization of human welfare. Its scope has been expanding day-by-day and at present, it encompasses many dynamic aspects such as financing, planning, and budgeting, resource mobilization, investment, even dis-investment, public expenditure, and financial control.

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