Contents Contents


Module 1 – Fundamental Principles of Public Finance Goals and Objectives of Governments ..............................................................................................................................................3 Laissez-Faire ..........................................................................................................................................................................................................4 Origin ..........................................................................................................................................................................................................................4 Goals of the Laissez-Faire System .........................................................................................................................................................5 Social Welfare Goals .........................................................................................................................................................................................5 Socialism (or Communism) ......................................................................................................................................................................6 The Ideology of Socialism ............................................................................................................................................................................6 The 10 Commandments of Socialism (according to Karl Marx and Friedrich Engels) .............................6 Characteristics of Socialism ......................................................................................................................................................................7 Social Welfare State ...........................................................................................................................................................................................7 Economic Welfare State as an Ideology ............................................................................................................................................8 Government Functions and Public Services .................................................................................................................................9 Line Functions: Vertical ...............................................................................................................................................................................9 Staff Functions or Services: Horizontal .........................................................................................................................................12 Classification of Government Services ..........................................................................................................................................12 Classification of Services ..........................................................................................................................................................................16 Privatisation of Government Services ..............................................................................................................................................16 Reasons for Privatisation ..........................................................................................................................................................................18 Methods of Privatisation ...........................................................................................................................................................................18 Activities............... ............................................................................................................................................................................................20


Module 2 – Guidelines for a Democratic Financial System Introduction .......................................................................................................................................................................................................24 Origin of Democracy ...................................................................................................................................................................................24 The Magna Carta .............................................................................................................................................................................................25 The American War of Independence .............................................................................................................................................25 The French Revolution ...............................................................................................................................................................................26 10 Democratic Principles for Public Financial Management .........................................................................................27 Accountability ....................................................................................................................................................................................................28 Accounting ...........................................................................................................................................................................................................29 Financial Decision Making in a Participatory Democracy .............................................................................................30 Representatives Versus Voters ..............................................................................................................................................................32 Activities................... .......................................................................................................................................................................................34


Module 3 – Role of the Central Government in the Financing of Public Institutions The Legislature .................................................................................................................................................................................................36 Parliament ............................................................................................................................................................................................................36 Cabinet............ ....................................................................................................................................................................................................36 Parliament: the people decide ...............................................................................................................................................................36 The power and authority relationship ............................................................................................................................................37 Voters and The Legislature ......................................................................................................................................................................38 Interest groups and The Legislature .................................................................................................................................................38 The imposition of tax ..................................................................................................................................................................................39 The allocation of funds ..............................................................................................................................................................................40 Functions of the government budget ..............................................................................................................................................40 Redistribution of wealth ............................................................................................................................................................................41 Financial control .............................................................................................................................................................................................43 The Auditor-General ...................................................................................................................................................................................43 Public accounts committee .....................................................................................................................................................................44 The Public Protector ....................................................................................................................................................................................45


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