THE CONCEPT OF COST CONSCIOUSNESS IN THE MANAGEMENT OF PUBLIC FUNDS
1.1 BACKGROUND OF STUDY
Infact one should understand after reading this topic how to manage public funds, according to Adolph Wanger (1835-1917) who was a German Economist, who based his law of increasing state activities on historical facts primarily of German.
“To increase both intensively and extensively there was functional relationship between the growth of an economy and the growth of the government activities so that the governmental sectors grows faster than the economy.
The question then is, if the governmental expenditure is increasing intensively and extensively, how do the mangers of public funds react to this increase? Are they at the all conscious of the cost accompanying the increased expenditure? And what measures dots hey take to control these cost in order to reduce, if not to avoid the possible harmful incidental effects of public expenditure.
Again, complainants form the public and the report of national and state decisions together with the auditor generals report for many years have shown a contains loss of public funds in Enugu State.
At one time the report was on embezzlement, at another time, it was on the abandonment of public projects while at other times the cry was the non-viability of many public parastatals and investments.
But before we go into proper study of the problem, let me examine three key words in the topic. The concept of cost consciousness in the management of public funds.
These three key words are
(b) Management and
And for proper understanding of the concept let me treat them one by one.
a. Cost: The term cost is commonly used by all, yet there exists not one unique concept of cost. Different cost concepts exist or different purposes.
A further complication arises when the same cost term is used to represent different purposes by different people.
The accountant, the manager etc. one may say that the cost of science equipment supplied by Enugu State Government to Secondary schools is ten million naira (N10, 000,000), it does not cannot any exact meaning.
Is it a cost to the purchaser, the government or to the manufacturer? Therefore, the term cost without a proper modifier does not convey a clear meaning. For a proper understanding of a cost concept, context in which it is used should also be made clear.
For instance, when someone bought a manufactured product form a company in resealing it he should and his transportation money and other expenses.
(b) Management: Pro Peter Ejiofor defined management as an art on Science of working in an organization through the activities of people to a achieve ones personal; goals in the context of the goals of one’s organization. This definition is all right for our purpose, by management we mean administration and directing the affairs o the organization, that is the process and procedures used in the administration of funds in order to achieve maximum benefit form it.
(c) Funds: To ensure that many will be expended for designated purpose, government establishes funds.
A fund has been defined by national committee on municipal Accounting statement,Chicago(1941) as a sum of money or other research as set a side for the purpose of carrying on specific activities.
Cost consciousness is a related area in which accounting can contribute to efficiency. It is also a concept which embraces a plan to operate on the bases of minimizing necessary costs and to do away with those that are unnecessary and which judges the performances of the subordinates and others by the same standards of the economy and reason baleens of expenditure within a given budget based on a planned action over a period of time to provide maximum benefit.