BACKGROUND OF THE STUDY
A financial management system can be said to be the methods and software that an organization employs to control and administer its revenue, spending, and assets in order to maximize profits and ensure long-term viability. Financial management is the process of managing an organization’s or program’s resources in order to fulfill goals and objectives as efficiently as feasible by putting those resources to use in carrying out planned activities (Abdullahi, 1999). A financial management system is made up of a set of tools and processes that allow for the management, conservation, allocation, and investment of an organization’s or program’s resources.
In most countries throughout the world, financial management is at the heart of public sector reform. With the rising problems of budgetary crises, fiscal shocks, and public expectations for better government services, the need for improved financial management strategies is becoming more apparent in developing and transitional economies. Abdullahi, (1999) opined that by streamlining invoicing and bill collection, eliminating accounting errors, minimizing record-keeping redundancy, ensuring compliance with tax and accounting regulations, assisting personnel in quantifying budget planning, and offering flexibility and expandability to accommodate change and growth, an effective financial management system improves short- and long-term business performance. The establishment of laws, institutions, and processes that enable the sustainable, efficient, effective, and transparent administration of public resources is referred to as financial management. The essential notion of ‘financial viability’ or ‘financial sustainability’ is at the heart of financial management (Dale, 1995).
Financial Management is an operation activity that is responsible for the acquisition and efficient utilization of finances required for optimal performance. Dale,(1995) describes FM as “the practice of maximizing the use of existing finances in order to achieve long-term corporate objectives” (Brealey, 2008). The FM is “an application of broad managerial concepts to the field of financial decision-making,” (Chive de Paula, & Frank, 1999).
STATEMENT OF THE PROBLEM
Good governance is defined as effective and well-coordinated activities aimed at achieving optimal results via a harmonic mixing of natural, material, human, and financial resources in order to improve the population’s socioeconomic well-being. In government activities, good governance must be accompanied by stringent accountability and openness (Aborisade, 1996). The success of a state’s management in terms of quality according to the intended expectation is viewed as a success. Many states utilize financial management systems in order to reach such accomplishment. Most states are aware of the benefits of an effective financial system but are the financial management systems being used? Is it effective? And has it achieved its purpose? This study seeks to address that.
OBJECTIVES OF THE STUDY
The main purpose of this study is to investigate financial management systems effectiveness. Other objectives of this study are:
i. To ascertain the importance of financial management system
ii. To determine the types of financial management systems used in Imo State.
iii. To examine the effects of financial management systems used in Imo State.
iv. To examine the challenges of of using financial management system in Imo State.
i. Is financial management system important?
ii. What are the types of financial management systems used in Imo State?
iii. What are the effects of using financial management system in Imo State?
iv. What are the challenges of using financial management system in Imo state?
SIGNIFICANCE OF THE STUDY
This study will be greatly beneficial to the different state governments as the findings of this study will reveal the benefits of an effective finance management system, the effects of using it and the challenges encountered.
Additionally, subsequent researchers will use it as a literature review. This means that other students or scholars who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regards to using an effective financial management system in government.
SCOPE OF THE STUDY
This study will be focused on the investigation of financial management system effectiveness. It will also be focused on the types, effects and challenges of financial management system.
This study will be using staff of Ideato North Local Government Council of Imo State as enrolled participants for this study.
LIMITATIONS OF THE STUDY
This study will be limited to the investigation of financial management system effectiveness. It will also be limited to the types, effects and challenges of financial management system. This study will be using staff of Ideato North Local Government Council of Imo State as enrolled participants for this study and thus further research is needed before the data from this research can be used any where else.
Also in the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. However, the researcher was able to manage these just to ensure the success of this study.
DEFINITION OF TERMS
Investigation: the action of investigating something or someone; formal or systematic examination or research
Financial Management Systems: is the software and processes an organization uses to manage assets, income and expenses. An FMS performs various functions: reducing accounting errors, maintaining audit trails and ensuring compliance with applicable accounting standards.