Essay on assessing financial condition



Essay on assessing financial condition

To begin with, assessing financial condition entails looking at the nature of the finances of an agency with the view of determining whether the public agency has got a financial capability to meet its obligations (Kluza, 2017). Several researchers have conducted various studies with the objective of establishing the significance of assessing financial conditions from a government perspective, a citizen perspective and the challenges facing the AFC.

Moreover, the researchers have examined the various tools applied to the measurements of the AFCS. They have gone on to give the best practice examples and the possible outcomes from not the AFCS. This paper focuses on evaluating the studies that have been done already.

The Importance of Assessing Financial Conditions from the Government Perspective-essay on assessing financial condition

Assessing financial conditions from the government perspective is imperative because of numerous reasons. To begin with, it is vital to engage in the exercise of the financial evaluations because it is the avenue through which the government can have an understanding of the quality of the impact that it has on its people. Through the assessments of the finances, the government is able to obtain the knowledge on the number of hospitals that a given amount of money can help in the construction. If more health centers have emerged, then, it can be confirmed that the value of the money has been observed. It is then followed by the reality that the majority of the nation’s citizens can access medical care which increases their lifespan (Kluza, 2017).

Secondly, it is critical for the government to assess the financial conditions because it is a technique that can be applied by the central administration to have an understanding of the areas which need higher budget allocations (Valkauskas, 2013). For instance, after doing the assessments the government may have the knowledge that there is not enough money to train soldiers who would then join the military. It can happen during an era of insecurity which is characterized by the presence of more deaths which may have been caused by the Al-Shabaab attacks. During such, moments, the government may elect to allocate more money to the Security department of the state with the objective of fostering national security.

Equally, from the government’s perspective, it is important to assess the financial conditions because it is a platform through which the government can detect cases of fraud and mismanagement of the funds by some of the government officials (Kluza, 2017).  It can be accomplished through carrying out of the walk through tests which acts as an avenue that demonstrates if the quality of the goods and the services bought to match the amount of money that has been paid in the acquisition of the commodities. For, instance if the minister for transport claims to have spent higher amounts of money in the construction of a poor quality road, then such an individual may be suspected to be mismanaging of the public funds and therefore the person who appointed the minister may decide to lay him off.

Besides, assessing the financial conditions from the government perspective is important because it acts as a tool through which the government can make informed decisions (Valkauskas, 2013).These decisions may involve the transformation of the fiscal and the monetary policies of a country. For instance on realizing that some of the government agencies are having limited funds to complete some of the public projects, the government may elect to increase the amount of the taxes that they get from the taxpayers. Moreover, after carrying out the financial evaluations, the government may realize that some of the businesses which pose a health hazard to the members of the public are generating huge sums of money. This may have a hand on the government coming up with control measures which may entail heavy taxation.Essay on assessing financial condition

Moreover, it is imperative for the government to assess the financial condition of its agencies with the objective of reporting financial information to the members of the is because the government has the responsibility of being transparent to its people (Kluza, 2017).To that end, they report the state of the financial position to the nationals of the country so that the central administration can demonstrate how the available funds have been used.

Through, assessing the financial condition, the government is able to cut down on the short run and the long run expenses (Ritonga, 2014). It is because the AFC enables the central administration to predict the consequences of structural and cyclical loopholes. To that end, the government seeks to accurately find the amount of the revenue received from the citizens in form of taxes and the impacts that the resources present would have in the satisfaction of the articulated expenses.

Equally, assessing the financial condition enables the government to establish whether the sources of revenue have the elements of uncertainty and volatility (Kluza, 2017). In situations whereby this is true, the central administration has enough information that is significant in guiding it to apply the budgeting-revenue technique. The approach enables the legislators to prioritize budget requests through sticking to the revenue parameters. To obtain budget reductions, the central government may do so through the application of information technology.

The Values of AFC from a Citizen perspective-essay on assessing financial condition

The nationals of a nation are interested in the assessment of financial conditions for several reasons. One of the reasons that provoke this curiosity is the desire to have an understanding of whether the government is able to meet the some of its obligations that mature within 30-60 days. It may involve the capacity of the government meeting its expenses within a budgeted period without overspending. The situation that occurs if the government does not incur any deficits is known as the budgetary solvency (Valkauskas, 2013).

Similarly, the assessment of the financial condition from a citizen perspective is that it is a channel through which the nationals of a nation can have an understanding of the government’s ability to provide high-quality services essential for the welfare of the society. It is an indication that the government can provide the requirements of the general health of its citizens. To that end, some light is shed to the citizens on whether the government has the ability to respond to economic disruptions, for instance, closure of a recruiting agency and the changes that result in slow economic growth and development (Kluza, 2017).

Equally, from a citizen’s perspective, the assessment of the financial condition is important because it is a platform through which the members of the public can have an understanding of whether the central government can be able to meet some of the most important costs when they come due (Ritonga, 2014). For, instance, the citizens of a nation may have the desire of knowing whether the government is in a position to make pension payments, enable the civil servants to go for their accrued leaves and incur expenses for the deferred maintenance.

The Challenges of Using the Assessing of the Financial Condition-essay on assessing financial condition

Some of the techniques that have been applied in the process of indicating the fiscal health of the government are misleading.  For instance, the traditional method that applies bond-ratings has been found to be affected by several flaws. One of the weaknesses of this approach is that it entails the application of long-term debts in the financing of operating expenses that are occurring currently (Ritonga, 2014). Besides, the probability of a bond default is associated with the government’s capacity to meet maturity obligations. It is critical to note that this does not include the broad fiscal health of the members of the public. The approach also disregards an analysis of the government’s capability to maintain the desired levels of service to its citizens.

The traditional financial statements are not good enough for the evaluation of the fiscal health of the various communities in a given country. These statements conform to the set international standards. However, they disregard some information that has a relationship with the data, for example, outside revenue sources, trends in per capita income and industrial growth (Kluza, 2017).

The Development of Various Measurement Tools to AFCS-Essay on assessing financial condition

To assess the financial condition, it is imperative for the government to come up with an essential monitoring and evaluation tool. To come up with the structure, several factors should be considered. These are the economic state of a nation, business conditions and the employment and the population trends (Ritonga, 2014). The most important pieces of data must be brought together and evaluated meticulously. Even though the process may be marred by a number of problems, it is worth taking following because the benefits are more than the costs.

Obtaining a monitoring financial trend is critical because it identifies, analyzes and measures the factors determining the fiscal condition of a particular community (Ritonga, 2014). Thus, it is a platform that is vital in the organization of internal data and therefore it is important in the preparation of budgetary and financial reports. Besides,  the monitoring and the evaluation tools take into account other external factors like demographic data that can be applicable in coming up with the financial indicators that are critical in the monitoring of the financial changes present in a particular community.

Best Practice Examples

The best examples for assessing of the financial conditions are the applications of the various financial ratios that indicate the performance of a financial enterprise (Usang, 2016). For instance, the computation of the current ratio is an ideal example of the best practice examples. This ratio is applied in the determination of whether the public agency is in a position to meet its current liabilities. The majority of the municipal councils around the globe use this ratio.

Another ideal example is the computation of the operating ratio.  It is the fraction of the company’s operating expenses to the revenue. The figure that is obtained is imperative because it enables one to have an understanding of how efficient the management is (Kluza, 2017).

Possible Outcomes from not AFCS-Essay on assessing financial condition

In absence of assessing the financial conditions, the citizens of a nation together with the government will be in a predicament. It is because the nationals of the country will not be in a position to have the knowledge on whether the government can meet some of its expenses or not. These may include pension payments. Besides, the government may not be in a position to know which organizations are letting them down which will then be disastrous to the economy because of some of the social amenities, for instance(Dong, 2015).


Dong, G. (2015). Performing well in financial management and quality of care: evidence from hospital process measures for treatment of cardiovascular disease. BMC Health Service, 15.

Kluza, K. (2017). Risk assessment of the local government sector based on the ratio analysis and the DEA method. Evidence from Poland, 7(3).


Usang, O. (2016). Local government financial condition and sustainable development of communities in Nigeria.