Before Imam Ali (a) took charge of the State, the condition of the country was in a hopeless turmoil. All the most important people and the companions of the Holy Prophet (s) had lost sympathy with the government and were openly hostile to it. Rank-favouritism and short-sighted greed of Marwan and his clan were responsible for this chaos. People were emboldened to rise in arms against the mismanaged and malevolent rule. Their uprising had succeeded. They had lost every respect of authority, and had no desire to see the ruling regime back into power. On the contrary, the members of the overthrown regime had sinister designs to gain back the control which had benefited them for so long, while some influential persons were hoping to gain caliphate for themselves.
For three days after the murder of Caliph Usman, there was anarchy in the capital and on the fifth day, Imam Ali was unanimously elected. He neither claimed nor contested for the temporal kingdom. It was forced upon him. But when he accepted it, he openly declared his policy in his very first speech. And that was to the effect that they had elected him as their temporal ruler and so he would remain as long as they kept on obeying him. But since he had no confidence in their sincerity, he had twice refused to accept their request to act as their ruler; but their hopeless plight and their repeated persuasions moved him to accede to their entreaties; yet he was under no obligation of them for their decision. On the contrary, he had done them a service by agreeing to rule over them. He knew fully well the reasons of their imploration for his rulership because they had been badly treated before by the malevolent, cruel and oppressive regime. The ruling class had insulted them and had always refused to listen to their grievances and to come to their relief. The masses had been kept ignorant about the true teachings of Islam, they had been made to concentrate on worldly benefits at the cost of religion and piety. Consequently a despotic rule of which they were tired and wanted a sort of Divine rule that had been introduced by the Holy Prophet (s). That desire had made them look for somebody who could re-establish that type of government; and they realized that Imam Ali (a) was the man in whom the Holy Prophet had confided and more than anybody else, he had entrusted his faith in him, and that he had been the trustee of the Holy Prophet's legacies. Hence, they had unanimously elected him as their ruler.
But they had not realized the responsibilities and obligations under which they had brought themselves by making him their Amri (Ruler). Imam Ali (a) knew their weaknesses and also knew that they would lose confidence in him when they would find that he attached more importance to general welfare of the people than to individual's interest, he would make them follow the path laid down by the Holy Prophet (s), when with the introduction of equality and equity, he would make them accept the principles of brotherhood of man and general amity towards their fellow-beings, and when he would try to lead them towards selfless discharge of duties as laid down by Allah and His Prophet, and thus would make them a model to be adopted by those who desire peace and prosperity under the Divine rule.
He was afraid that with introduction of such system of the government and the society, they would revolt against him, they would clamour for personal benefits, and would crave for comfort and pleasure as well as wealth and power which could not be possible in his government. They did not realize that by allowing them carnal desires and simple pleasures, by granting them limited freedom and by keeping them in ignorance, the rulers had actually turned them into automatons to work for them, kind of slaves without vision, foresight and prospect of future life. But Imam Ali (a) would, try to make them follow the true path of religion of their own free will, to develop the habit of simple living and high thinking and to give up the desire of seeking undue favours and unjustifiable pleasures. That was the kind of men that Allah wanted them to be and the Holy Prophet (s) had tried to mould them likewise. The task had not been easy then, the lapse of twenty five years had made it even more difficult, but he would try to achieve it.
Whatever ray of hope that was lurking in the minds of people, expecting wealth, prosperity and governorship, dissappeared by this very first speech of Imam Ali (a). They knew that they could not expect unholy and ungodly concessions from Imam Ali. Their unreasonable claims on public wealth, their fiefs and their unjustifiable holdings of public prosperity will not remain with them. The result was three rebellions against Imam Ali and a restless period of rulership for about four years. But Imam Ali with the sincerity of purpose tried to do what he had promised, that is to raise the mental uplift of the masses. This he successfully carried out against very heavy odds.
The second thing was to create a Central Bureau, where he distributed the work of training the crude Arabs into educated and civilized beings. To Abul Aswad Duwayli, he dictated basic principles and rules of grammar for the Arabic language with special instruction to concentrate on the syntax of that language. Abdur Rahman Sulmi was made to look after the art of reading the Quran correctly. Kumail ibn Ziyad was made responsible for mathematics, engineering and astronomy. Umar ibn Sulma for Arabic language and literature (prose), Ubada ibn Samit for poetry and logic, Abdullah ibn Abbas for principles of administration and rhetorics, and he himself for philosophy of religion, ethics, commentary of the Holy Quran and the traditions of the Holy Prophet. But actually he was the hub of the whole activity. Though every hour of his glorious life was pre-occupied yet he found time to teach his subordinates, what to say, when and how to say it, what to teach and when and how to teach it. Long after his demise everyone of his pupils proved a shining star in the firmament of Islamic civilization and have been considered as leaders.
The next subject which engaged his immediate attention was the improvement in administration. To make due arrangements for security of the state from external attacks, to maintain law and order, to check corruption and bribery, to provide equal opportunities and to have equal distribution of public wealth among his subjects, to appoint honest and pious officers, to chastise and remove from service the dishonest ones, to organize a powerful army, to avoid enrolment of mere mercenaries in it, to take care of traders and trades, and to treat non-Muslims with deserving leniency and respect, were apparently the items of his system which he successfully implemented.
He divided the States into following sections:
(i) Public Finance
(iii) Central Secretariat
(iv) Judiciary and (v) Provincial Oficers.
The department of the Public Finance was divided into two sections:
(a) Collection section and
(b) Distribution section
Collection Section was sub-divided into three heads and only three kinds of taxes were allowed to be collected by Imam Ali:
(i) Land Revenue: It was usually collected in coins of silver and gold or in bullion. Officers collecting this revenue were some times appointed by the center, but the Imam had also authorized the governor to appoint such officers himself.
(ii) Zakat (Religious Tax) and Sadaqa (obligatory alms): It was usually collected in kind or in live-stock. Officers who were to collect this revenue were always appointed directly by the Imam and he took great care to appoint honest and pious persons on these posts and to have a close watch on their activities and behaviour.
(iii) Jizya: A tax from non-Muslims in lieu of Zakat, etc. and in return for the security and amenities provided to them. Collection of no other kind of tax, from non-Muslims was allowed by the Imam.
Land survey was carried on by him whenever necessary. Every tax payer had the right to appeal and an appellate court was founded. Officers for this court were directly appointed by the Imam.
Imam Ali was the first man to introduce the budget system for collection of revenues and for its expenditure. Each province had to present its budget directly to him for approval. The income was divided into two heads, provincial and central. Zakat and Sadaqa were items of the Central Revenue while, Land Revenue and Jizya were Provincial Revenue.
The schedule of rate for Land Revenue was fixed by him as under:
1. 1st class, (most fertile) land -------------- One and a half Dirham per Jarib
2. 2nd class, (fertile land) -------------- One Dirham per Jarib.
3. 3rd grade land -------------- Half Dirham per Jarib
4. Vine yards, orchards, etc. -------------- Ten Dirhams per Jarib.
(One Jarib being 2269 square yards, approximately)
Sadaqa and Zakat were the taxes which only Muslims had to pay. It was a tax levied on personal income, landed property, hoarded bullions, currency and live-stock, and its rate was fixed by the tenets of Muslim Law.
Jizya was a personal tax, collected per head of a person irrespective of his income or property. But such persons were divided into various classes. It was an annual tax. The division of classes was as under:
1st class: Very rich persons and land-owners -------------- 48 Dirhams per head
2nd class: Middle class people -------------- 42 Dirhams per head
3rd class: Businessmen -------------- 42 Dirhams per head
4th class: General public -------------- 12 Dirhams per head
There were strict orders that no Jizya was to be collected from beggars and persons falling unde following categories:
(i) Those who were above 50 years of age,
(ii) Those who were below 20 years of age,
(iii) All women-folk,
(iv) All paralysed persons,
(v) All disabled persons,
(vi) All blind persons and
(vii) All insane persons
Income from the source of Zakat and Sadaqa was reserved for the following heads:
(i) Administration of the Departments of Collection and Distribution
(ii) Grants, donations and aids to the poor, destitue, orphans, aged widows and disabled persons.
(iii) Stipends to volunteers who fought for the State
(iv) Pensions to widows and orphans of soldiers and officers of the army
(v) To acquire and to set free slaves from the bondage
(vi) Reparation of government loans
(vii) To help Hajis (pilgrims) whenever and wherever they were found stranded
Items (iii) to (vi) were introduced for the first time by Imam Ali and so far as item (vi) was concerned, previously no ruler ever thought of his kingdom to be morally obliged to pay back a loan taken from somebody.
Imam Ali was the first man who declared that a ruler's share of income from the State was equal to that of any commoner.
Income from Jizya was earmarked for the following items of expenditure:
(i) Maintenance of army
(ii) Construction and maintenance of forts
(iii) Construction and maintenance of roads and bridges
(iv) Sinking of wells and
(v) Construction of inns.
Land Revenue was the provincial income to be spent on maintenance of courts, offices, and other necessary items as per orders of the Center. Before I bring to an end, the description of his system of Revenue Collection, I must mention a remark passed by him in this regard to one of his governors. He said,
"So far as collection of Land Revenue is concerned, you must always keep the welfare of the tax-payer, which is of greater importance than the taxes themselves, and as acutal taxable capacity of people rests on fertility of land, therefore, more attention should be paid to the fertility of land and prosperity of the subjects than to the collection of revenues". (Nahjul Balagha, Letter 53)
Distribution of public wealth was a subject on which Imam Ali (a) devoted much attention and which in return caused him to lose many supporters and followers.
The first reform that Imam Ali (a) introduced was to recognize the Treasury and Accounts Department. Dishonest officers were removed from the services. A system of accounting was introduced. Usman ibn Hunayf was appointed as the Chief Treasury Officer. The principle of equal distribution of public money was introduced. The system of weekly distribution was for the first time adopted. Thursday was the distribution day so that Muslims could spend their holidays on Friday happily. On every Thursday accounts were closed, and every Saturday fresh accounts were entered.
Impartiality and equity were the key-notes of his policy on distribution of wealth. At the Center, (Kufa), he often supervised the distribution himself and after the work was over, and accounts cleared, he would perform his prayers in the Treasury and thank his Lord that he had discharged his duty faithfully.
Shu'bi says that as a young boy, once he passed by the Treasury at the time when Imam Ali was supervising the distribution, he saw negro-slaves standing in line with the Arab Sheikhs, and getting equal shares, and within a short time the heaps of silver and gold coins disappeared, the Treasury was cleared, Imam Ali said the prayers and left the office empty-handed. That day he had given his share to an old woman who complained that her share was not sufficing her. 
Once, one of Imam Ali's favourite and trusted companions, Usman ibn Hunayf, told him that by introduction of the principle of Equal Distribution of wealth and bringing important persons down to the level of commoners, and by raising the status of Negroes, and Persians to that of Arabs, by alloting shares to slaves equal to their masters, by depriving the rich persons of their land-holdings and by stopping special grants apportioned to them according to their status, he had done more harm to himself and his cause, than good. Continuing he said, "Look Sir! These are the reasons why the influential and rich Arabs are deserting you and are gathering around Muawiyah. Of what use these poor persons, disabled people, aged widows and Negro slaves are to you? How can they help and serve you?"
He replied, "I cannot allow rich and influential persons to exploit the people of this Islamic State and to run an inequitable and unjust system of distribution of wealth and opportunities. I cannot for a moment tolerate this. This is Public wealth, it comes from the masses it must go back to them. The rich and powerful persons have not created any wealth, they have merely sucked it out from the masses and after paying the taxes, etc. what is left to them is many times more than what they pay to the State and they are allowed to retain it. Had all this been private property, I would have gladly distributed it in the same manner. So far as their desertion is concerned, I am glad they have deserted me. So far as the usefulness or services of these disabled persons and have-nots is concerned, remember that I am not helping them to secure their services, I know thoroughly well that they are unable to serve me. I help them because they cannot help themselves and they are as much human beings as you and I. May Allah help me to do my duty as He wishes me to do." 
Imam Ali (a) was a born soldier and had started his military career at the age of fourteen, when he acted as a bodyguard to the Prophet. Then onward, he was the only military talent on whom the Prophet (s) would rely and all arrangements for organization of defences and maintenance of an army of volunteers or soldiers were totally entrusted to him by the Holy Prophet (s). It was his ability and valour which brought such successes to Islam in its early days against such heavy odds. Even Caliph Umar used to consult him regarding military problems. 
Time had not dimmed his valour or his ability to organize such an important section of the State. At the age of sixty, in the battelfields of Jamal, Siffin and Naharwan he was as brave a soldier, as good a leader and as keen a marshal as he was in the prime of his youth in the battlefields of Badr, Uhud, Khandaq, Khaybar and Hunain! (See Imam Ali's words about it)
During his short period of rulership of about four years, he organized the department very carefully.
The first liability on the State exchequer was the army department. Every governor of the province besides being chief finance officer of the province was also the Commander of the army. When officers could not be found to look after the military as well as civil administration, then the functions would be divided.
Imam Ali (a) did not tolerate mere mercenaries but did not let the services of volunteers go unpaid. He hated murder and bloodshed and desired his soldiers to be soldiers in the service of Allah and religion. His strict orders to the army were,
"Always keep fear of Allah in your mind, remember that you cannot afford to do without His Grace. Remember that Islam is a mission of peace and love. Keep the Holy Prophet (s) before you as a model of bravery, valour and piety. Do not kill anybody unless in self-defence. Take care of your mounts and your arms, they are your best guards. Work hard while you are at it and then devote some time to rest and relaxation. Rest and relaxation are as much necessary for you as hard work. Do not let one overstep the time limit of the other.
Do not pursue those who run away from an encounter, and do not kill fleeing persons.
Do not kill those who beg for life, and mercy.
Do not kill civilians.
Do not outrage the modesty of women.
Do not harm old people and children.
Do not accept any gifts from the civil population of any place.
Do not billet your soldiers or officers in the houses of civilians.
Do not forget to say your daily prayers.
Fear Allah. Remember that death will inevitably come to everyone of you sometime or the other, even if you are thousands of miles away from a battelfield; therefore be always ready to face death."
Imam Ali did not appreciate heavily armed and clad soldiers. He liked lighter swords, lighter bows and arrows, lighter coat of arms and lighter chain of armours. He preferred to have an agile and a mobile army.
 Kitabul Gharat
 Sirajul Mubin; al-Murtaza; Kitabul Gharat.
 Kitabul Gharat; Sirajul Mubin; al-Murtaza; Kitabus Siffin; Sharh-e-Nahjul Balagha, Ibn Abil Hadid