FINANCIAL MANAGEMENT

Financial Management of Department of Defense



Financial Management of Department of Defense

Introduction

Financial management of Department of Defense is similar to financial management in the commercial sector in many respects; however, certain key differences shift the focus of a Department of Defense financial manager. A for department of defense focuses on profitability and maximizing shareholder value; Department of Defense's primary goal is not to increase shareholder value; rather it is to provide some socially desirable need on an ongoing basis. A Department of Defense lacks the financial flexibility of a commercial enterprise because it depends on resource providers that are not engaging in an exchange transaction. The resources provided directed towards providing goods or services to a client other than the actual resource provider. Thus, the Department of Defense must demonstrate its stewardship of donated resources — money donated for a purpose must be used for that purpose. That purpose is either specified by the donor or implied in the Department of Defense's stated mission. The management and reporting activities of a Department of Defense must emphasize stewardship for these donated resources. The staff must be able to demonstrate that the dollars were used as directed by the donor. The shift to an emphasis in external financial reports on donor restriction has made use of fund accounting systems even critical (Thomas, 2002).

Discussion

Types of Funding

Sources of funding for Department of Defense are divided into three groups:

1.Referred

2.Public

3.Own funds

Referred

Public

Own

Charitable funds

Direct financing

Income from operations

Sponsorship funds

Indirect financing

Revenues from Business

Grants

-

Dues

Reserve contributions

-

-

Borrowings (loans, Muniz)

- -

-

Charity and sponsorship

Charity is voluntary activities of citizens and legal persons by the generous transfer of property, including cash, unselfish performance of works, rendering services, rendering other support. Sponsorship is an economic transaction in which the exchange of money, goods, services, work on advertising opportunities, conduct PR-activities, sales promotion and others. In contrast to the charity, which represents a form of voluntary selfless support department of defense activities with by individuals and legal entities, sponsorship is characterized solely by commercial interests.

Donation

Donation recognizes the donation of goods or the precise to nonprofit purposes (i.e. you cannot donate work or services). Donations may be made by citizens; medical, educational, charitable, scientific and educational institutions, institutions of social protection, foundations, museums and other cultural institutions, public and religious organizations. For these persons, donations are not taxed on department of defense (Warren, 2007).

Patronage

Patronage - is providing long-term economical and organizational support department of defense activities in return for certain rights to participate in management. Cartridge may be entitled to participate in strategy development, current planning department of defense activities, etc.

Dues

Dues are a regular dismissal of a department of defense organization with the purpose of obtaining a certain package of goods and services.

Grant

Grant is funds earmarked funding (cash or other property), allocated on a competitive basis and provided free of charge and irrevocably with the subsequent report on their intended use.

Financial activities

Fund accounting is also used by state and local ...