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Welcome to Public Financial Management: Planning and Performance. We hope that you will find the module stimulating and useful. Even if you do not have a background in public finance we think you will be able to learn a lot and do well in the assessment for this module. There is technical material and language that may seem to outsiders to be jargon, but we aim to explain the reasoning behind all new terms as we introduce them and to avoid unnecessarily technical language.

It is an interesting time to be studying public finance for several reasons. First, there are changes in the way that the public sector ‘does its business’. Bureaucracies with strict hierarchies of public employees carrying out their duties according to a fixed set of rules are giving way, or have already given way, to different ways of working. In some cases there have been programmes of decentralisation and delegation of authority so that managers and professionals at relatively junior levels now have to take decisions based on the best information, including financial information, available to them.

In professions across the public sector – whether medical, educational, legal, engineering or custodial – people are making choices about investments, about how to achieve efficiency, how to stay within budget and how to improve performance. Whether reluctantly or willingly, people are having to understand costs, budgets, financial statements about cash flows and expenditures, even when they are not in accountancy.

In other cases, services are increasingly contracted out to commercial companies, to NGOs or to communities rather than being provided directly by public employees. These arrangements require a different set of disciplines – of monitoring other people’s performance, of assessing value for money of contracts rather than employees’ performance.

A second reason why public finance is interesting now is that in many countries what people are being held to account for is also changing. It is often not sufficient to have accounts that show that money has been spent as governments intended – politicians and the public want to know how well it has been spent, whether it has been used efficiently and whether it has achieved the purposes for which it was allocated. This widening of accountability, combined with the delegation of accountability lower down in the organisations, has placed a burden on accounting systems and on the managers and professionals who have to understand and operate them. Computer systems make financial management easier but managers need to understand the concepts underlying the numbers and the consequences of the financial information that is provided.

Learning outcomes

When you have completed this module, you will be able to:

  • explain how public budgeting fits into the macroeconomic framework
  • apply ideas about accountability to the production of various forms of account for public services and public money
  • discuss how changes in public management require different forms of public accounting
  • read a budget and a set of national accounts and explain the differences between budgets and accounts in different jurisdictions
  • explain costs and different ways of measuring them and how costs are used in budgets
  • discuss the budget process at national and sub-national levels and the techniques appropriate at different levels
  • apply budgetary control methods
  • use financial management to enhance the performance of public organisations
  • discuss how public financial management interfaces with politics and political choices.

Study materials

Study guide

You will receive a looseleaf binder containing eight units. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Virtual Learning Environment.


Allen R, R Hemming and BH Potter (Eds) (2013) International Handbook of Public Financial Management. Basingstoke, UK and New York, Palgrave Macmillan.


You will receive Reader volumes as part of the module materials, which consist of articles contributing to current debates in PFM. In addition, you will also use case studies and exercises in PFM in a variety of contexts.

Virtual learning environment

You will have access to the VLE, which is a web-accessed learning environment. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.

Module overview

Unit 1 The Context of Financial Management
  • 1.1 Introduction
  • 1.2 What is a Budget?
  • 1.3 The Macroeconomic Framework
  • 1.4 The Legal Framework
  • 1.5 Accountability
  • 1.6 Conclusion
Unit 2 Budget Coverage, Classification and Structure
  • 2.1 Introduction
  • 2.2 Coverage of the Budget
  • 2.3 Classification of the Budget
  • 2.4 Budget Composition
  • 2.5 The Line Item System vs Programme Systems
Unit 3 Costs
  • 3.1 Some Definitions of Cost
  • 3.2 Costing Systems
  • 3.3 Cost-Volume-Profit Model
  • 3.4 Absorption or Full Cost Recovery
  • 3.5 Activity Based Costing (ABC)
  • 3.6 Managing Costs
  • 3.7 Price-Based Costing
  • 3.8 Relevant Costs
Unit 4 Accounting and Budgeting: National Level
  • 4.1 Approaches to Public Accounting and Budgeting
  • 4.2 Cash Accounting vs Accruals Accounting
  • 4.3 The Macroeconomic, Fiscal Framework and the Medium-Term Expenditure Framework
  • 4.4 Policy Formulation and the Budget Process
  • 4.5 Budget Timetable
Unit 5 Accounting and Budgeting: Sub-National Level
  • 5.1 Translating the national budget into operational budgets
  • 5.2 Structure, Performance, Discretion, Block Grants and Contracts
  • 5.3 Fund Accounting
  • 5.4 Resource Accounting and Budgeting
  • 5.5 Which Techniques at Which Stage?
  • 5.6 Budget Timetable at Sub-National Level
  • 5.7 Case Study South Africa Basic Education
  • 5.8 Accounting for Services Provided by Third Parties
Unit 6 Budget Execution
  • 6.1 Introduction: Budgetary Control
  • 6.2 Controlling Operations
  • 6.3 Taking Action
  • 6.4 Risk of Policy Failure
  • 6.5 Case Study
Unit 7 Budgeting and Performance
  • 7.1 Introduction: Accruals Accounting and Output and Outcome Budgeting
  • 7.2 Defining and Measuring Non-Financial Items, Especially Outputs and Outcomes
  • 7.3 Case Study 1: Output and Outcome Definitions
  • 7.4 Case Study 2: Performance Budgeting in France
  • 7.5 Case Study 3: Performance Budgeting in Poland
  • 7.6 Performance Budgeting in Asia
  • 7.7 Case Study: Education Funding in South Africa
  • 7.8 Conclusions: Will Performance Management and Budgeting Ever Be Fully Implemented?
Unit 8 Budgeting and Democracy
  • 8.1 Introduction
  • 8.2 National Legislatures and the Budget Process
  • 8.3 Case Study: Canada
  • 8.4 Participatory Budgeting
  • 8.5 Case Study: Australia
  • 8.6 Conclusions on Budgeting and Democracy
  • 8.7 Is There a Single Best Method of Financial Management?

Tuition and assessment

Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.

You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 6, and the second assignment at the end of the module, on the Tuesday after Week 10. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.

You will also sit a three-hour examination on a specified date in September/October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in April each year.

Module sample

Click on the link below to download the module sample document in PDF.