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Introduction

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Introduction

Uploaded by

longnoenjerico8
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Introduction

Background of the study

Barangays are the smallest political units in the country, but they are the backbone of the
country's governance. Barangay administration dates back to the pre-Hispanic era when
civilizations arrived at the shores of the country by boat called the "balangay" and until today is
largely governed by Republic Act No. 7160 or local law. 1991 Government Code. The
Commission on Audit (COA) is a constitutional institution of the Republic of the Philippines
empowered to promulgate accounting and auditing rules and regulations for the government,
its subdivisions, agencies and bodies, including the government. - entities under its audit or
control and non-governmental entities and recommends the necessary measures to improve
their effectiveness and efficiency. COA Circular No. 2015-011 dated December 1, 2015 was
issued to all provincial governors, city/municipal mayors, auditors, treasurers, local treasurers
and budget officers and requires the use of the Barangays Financial Management Manual. The
purpose of the circular is to equip the barangays with international standards for accounting
and reporting on the use of government funds. The manual prepared by the commission was
revised and updated in response to stakeholder outcry and COA Resolution No. 2014-003 of
January 4, 2014 on the adoption of the Philippine Public Sector Accounting Standards (PPSAS).
The circular supersedes previous publications on filing and accounting of barangay financial
transactions. Although the Barangay Financial Management Manual was introduced in 2015
and is easily downloadable from the COA website and other search engine platforms, its
adaptation was long overdue because some barangays did not have the means to obtain a
copy. to their offices. Although some of the barangays are located in urban areas, a large
number of barangays are in rural communities where the strongest political will and effort is
needed to obtain a copy of the manual and implement it. Another perceived deficiency in
barangay governance is the change in administration and appointment of officials and the lack
of replacement procedures considering the 2018 Barangay elections. The high technicality of
the concepts and lack of knowledge, insufficient resources and communication facilities are also
risks that the educators identified as the biggest obstacles in the implementation of the rules,
thus this study was conducted to evaluate the implementation of barangay financial
management. Municipality of Panitan Capiz, Philippines.
Statement of the problem

The Municipality of Panitan is facing challenges in ensuring the effective and efficient
management of its financial resources at the barangay level, resulting in inadequate allocation
of funds, poor budgeting, and lack of transparency in financial transactions. Specifically, the
following issues are observed:

1. What are the factors affecting public financial management at the barangay level?

2. Does Educational background of the appointed officials affect the public financial
management at the barangay level?

3. Does an annual refresher course for financial management for all elected officials affect their
performance?

Hypothesis

The educational background of officials appointed at the barangay level has a significant impact
on the effectiveness and efficiency of public financial management, and officials with a higher
level (such as a bachelor's degree or higher) have better financial management practices. The
annual refresher course on financial management for all elected officials has a positive impact
on their performance in public financial management, which improves budgeting, allocation of
funds and transparency of financial transactions. Factors affecting public sector financial
management at the barangay level can be classified into three main groups: (1) internal factors
(e.g. lack of resources, inadequate training), (2) external factors (e.g. political pressure,
bureaucracy), and (3) ) contextual factors (eg community needs, economic conditions).
Theoretical framework

The study will be based on Effective financial management is a cornerstone of organizational


success, encompassing a range of strategies, practices, and principles aimed at optimizing the
allocation and utilization of financial resources. Several theoretical frameworks underpin
effective financial management, providing guidance on how organizations can achieve their
financial objectives. Agency Theory: This framework focuses on the relationship between
principals (e.g., shareholders) and agents (e.g., managers) and addresses potential conflicts of
interest that may arise due to differing goals. Effective financial management involves aligning
the interests of principals and agents through mechanisms such as performance-based incentives
and transparent reporting.Capital Structure Theory: Capital structure theory explores the optimal
mix of debt and equity financing that maximizes a firm's value while minimizing its cost of
capital. Effective financial management entails determining the right balance between debt and
equity to achieve financial stability and profitability.

Capital Asset Pricing Model (CAPM): CAPM provides a framework for estimating the required
rate of return on an investment based on its risk characteristics. Effective financial management
involves assessing risk-adjusted returns and making investment decisions that maximize
shareholder wealth.

Efficient Market Hypothesis (EMH): EMH posits that asset prices reflect all available
information, making it impossible to consistently outperform the market. Effective financial
management entails recognizing the implications of market efficiency for investment decision-
making, such as focusing on diversification and passive investment strategies.

Financial Ratio Analysis: Financial ratio analysis involves evaluating a firm's financial
performance and condition by examining key ratios such as liquidity, solvency, profitability, and
efficiency. Effective financial management utilizes ratio analysis to monitor performance,
identify areas for improvement, and make informed decisions.

Option Pricing Theory: Option pricing theory, particularly the Black-Scholes model, provides a
framework for valuing financial options and derivatives. Effective financial management
involves understanding and utilizing option pricing theory to manage risk, hedge exposures, and
enhance financial flexibility.

Modern Portfolio Theory (MPT): MPT emphasizes the benefits of diversification and the trade-
off between risk and return in constructing investment portfolios. Effective financial
management involves applying MPT principles to optimize portfolio allocations and achieve
desired risk-return profiles.

Pecking Order Theory: Pecking order theory suggests that firms prefer internal financing over
external financing and prioritize funding sources based on their cost and availability. Effective
financial management entails adhering to the pecking order principle while considering factors
such as capital market conditions and firm-specific characteristics.

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