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Hbc2205:Financial Management In Public Sector Question Paper
Hbc2205:Financial Management In Public Sector
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2011
QUESTION ONE – 25 MARKS
(a) (i) Explain the meaning of the Public Sector and its role in the National Economy. (3Marks) (ii) Highlight with clarity the differences between Financial Management in the Public Sector and Financial Management in the Private Sector. (3Marks) (iii)Show clearly the differences between ? Recurrent expenditure and development expenditures. (1Mark) ? Taxes and user charges (1Mark) ? Discretionary and non-discretionary expenditures. (1Mark)
(b) (i) Explain and illustrate with examples, the following forms of funds as used in government financial management. ? County funds (1Mark) ? Contingency fund (1Mark) ? Revolving fund (1Mark) ? Trust fund (1Mark) ? Sinking fund (1Mark) ? Consolidated fund (1Mark) ? Exchequer fund (1Mark)
(c) Explain the role played by ? Kenya Revenue Authority (1Mark) ? Controller of the Budget (2Marks)
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? Auditors General (2Marks) ? Treasury or the Ministry of Finance (2Marks) ? Parliament in the management and control of public funds in Kenya (2Marks)
QUESTION TWO – 25 MARKS
In his study Argyis found out that many chief executives and financial controllers are always reluctant to prepare budgets.
(a) In your own words, suggest reasons why many chief executives and financial controller maybe reluctant to prepare budget. (3Marks)
(b) (i) Highlight the principles underlying a good public budget. (3Marks) (ii) The functions/roles of public budgets in the financial management of the national economy. (5Marks)
(c) Highlight the following approaches to budgeting: ? Incremental approach (3Marks) ? Cost benefit approach (3Marks) ? Activity based approach (3Marks)
(d) Explain in details challenges and drawback of implementing budgets in Africa. (5Marks)
QUESTION THREE – 20 MARKS
“Borrowing to pay striking teachers, lecturers and doctors in the public sector is impossible and untenable considering the high level of public debt the National Treasury has to wrestle with” Njeru Githae , Kenya’s Government Minister for Finance.
(a) (i) Define Public debt. (3Marks) (ii) Highlight the reasons behind public borrowing and the high level of public debt in Kenya (3Marks) (iii) Explain with brief details the demerits of high level public debt. (3Marks)
(b) Differentiate between: (i) Domestic public debt and external public debt. (2Marks) (ii) Short-term public debt and long-term public debt. (2Marks) (iii) Commercial rates and concessionary rates (2Marks) (c) Under domestic public debt government borrows mainly through instruments of Treasury bills and Treasury bonds. Highlight clearly the merits and demerits of use of such financial instruments to raise funds for public expenditures. (6Marks) (d) Why is it not prudent to borrow funds to pay salaries as echoed by the financial Minister? (2Marks)
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QUESTION FOUR – 20 MARKS
In the period 2002 – 2012 Kenya’s Public Investments in roads, expansion of airport, sea ports; universities, housing, in plants machineries and equipment have increased notably as governments continue to disinvest in non-strategic commercial enterprises. Public investments have led to establishment of state corporations and increased shareholdings in Key public business enterprises such as in Kenya Power and Lighting Company, Kenya Airways while new corporations such as Kenya Rural Roads Authority, Kenya Urban Roads Authority, Kenya Investment Authority, Kenya Draught Management Authority among other have been set up.
Required:
(a) Explain the meaning of the term investment as applied in the public sector finance. (2Marks) (b) Explain clearly and in details the factors or reasons behind increase in public investments through establishments of state corporations/enterprises. (5Marks) (c) Explain the factors behind government privatisation (disinvestment) of certain public enterprises. (d) Explain the social benefits that arise from privatisation of state owned enterprises. (5Marks) (e) Differentiate clearly a state owned commercial enterprise (agency) and a state owned regulatory enterprise (agency), give examples. (3Marks)
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