Public Financial Management

By: EconomyWatch   Date: 30 June 2010

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Public Financial Management (PFM), supervised by government, tries to bridge the aspirations of a society with that of the resources available to an economy. These are basically managed through the operations and fiscal policy of the government.

The basic objectives of PFM are :

1. Setting of goals, viability assessment, allocation of resources and fund generation for the proposed project

  • 2. Modernization of the financial management system of the public sector entities
     
  • 3. Increasing the accountability of the managers of public sectors
     
  • 4. Ensuring timely disposal of quality projects
     
  • 5. Elimination of corruption

    Broadly, Public Financial Management includes :

    Financial Planning
    Formulation of budget
    Implementation of budget
    Reporting about the financial matters
    Evaluation of the internal works
    Accounting
    Making and receiving of payments from public bodies

    Public Financial Management (PFM) generally deals with :

    Accounting Rules
    Legal Compliance
    Managerial Control

    Public Financial Management has particular importance for the financial managers who manage the public bodies. This helps them to effectively and efficiently run the organization without any hiccups.

    Certain pecuniary and non-pecuniary costs are associated with Public Financial Management are

    Ordering, holding and outage costs associated with inventory
    Costs related with managing of cash, debt, pensions, investments, purchase, etc.

    Managing of Public or Government finance includes :

    Procurement Control
    Management Control

    A normal occurrence in Public Finance Management or in government projects is the price-adjustment in the post contractual phase. This inefficiency arises due to the commitment failure by the concerned organization.

    One of the most significant part of PFM is Expenditure management which is done in the following way:

    i.Objective, resource and policy determination
    ii.Allocation of the required resources
    iii.Assessment of viability of project

    After the formulation of objectives, resource allocation and assessment of viability of project the budgetary bureau makes all the arrangements for fund allocation to the specified project to the concerned spending agencies.
     


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