The positive impacts of implementing strong public financial management


The positive impacts of implementing strong public financial management

BY Iain Mansfield

Wednesday, August 21, 2019

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The public sector is changing. Our societies are demanding more services and better infrastructure and organisations are increasingly being asked to comply with international standards. This comes at precisely the time we are seeing the unprecedented impact of new digital technologies transforming the public sector, as well as the lingering impact of the financial crisis and increasingly uncertain global economic conditions.

The core objective of public financial management is to improve citizens' lives through better management of public money. Many countries are recognising that the former ways of operating a finance function will no longer suffice.

Though there are some extremely talented people, overall there is a shortage of high- quality finance professionals in government and audit. Citizens used to one-click ordering expect more from government than a paper-based tax form, and cash accounting is an insufficient tool for ministers and officials looking to make the best decisions on multi-year investments, public private partnerships, or the management of long-term government liabilities.

Strong public financial management underpins good decision-making. It affects how funding is used to address national and local priorities and determines the availability of resources for investment and the cost-effectiveness of public services.

It reduces the opportunity for corruption by shining a light on public finances and making sure all money is properly accounted for. All governments must ensure they maintain fiscal sustainability and can properly manage fiscal risk. To ensure the best resource allocation, we need accurate financial information – as well as effective regulation, high-quality governance, and strong institutions.

Throughout its global work, ACCA is committed to supporting strong and effective public financial management through our range of qualifications, professional insights and capacity-building work. We're proud to be working with the Ministry of Finance in Jamaica and the Institute of Chartered Accountants of Jamaica to train public sector employees in IPSAS, beginning with an initial cohort of 43 trainers this July.

In addition, earlier this year we teamed up with the International Federation of Accountants to produce a series of video case studies that showcase the positive impacts of implementing strong public financial management.

Our case studies show how the state government of New South Wales in Australia has introduced an asset and liability committee to take a total balance sheet perspective — improving the management of liabilities and selling assets to the private sector.

This has enabled the state to unlock AUS$33bn for new infrastructure construction. Or how Tanzania has introduced IPSAS to portray a true and fair view of the government's financial position, leading to better management of public money, more medicines and equipment in hospitals, and more children attending schools.

Or, in an example that may particularly resonate in the Caribbean, how the city of Mississauga in Canada has designed a targeted financial reform to deal with the impact of more frequent acute storms resulting from climate change. Through the introduction of a 'hard surface tax', those who contribute to the local flooding challenges now pay more for the solution.

Our aim is that these and other examples will be a catalyst for change, demonstrating the immediate impact reform can have on citizens. Better public financial management doesn't just mean better decisions and more money available for public services; it strengthens the social contract by improving public trust in government.

The public wants full accountability — and that means transparent management and financial reporting. Citizens are likely to have greater trust in public sector organisations where there is strong financial stewardship, accountability, and transparency in the use of public funds.

Overall, everyone benefits through strong public financial management. Senior officials gain the information they need to make better, more effective decisions in the public interest. Citizens gain from more money for public services — that means more teachers, more doctors, better infrastructure and safer communities. Society benefits from reduced corruption and misuse of public funds. And public sector accountants benefit from more fulfilling roles, greater job satisfaction, and the empowerment to move beyond being bookkeepers to business partners at the heart of decision-making.

Strong public financial management doesn't just happen by chance. It requires clear commitment from the very top of the public sectors, strong governance, robust institutions, effective systems and procedures, and sufficient numbers of high-quality, trained and professional finance staff at all levels of the organisation.

But getting it right has a positive impact that stretches beyond the public sector to provide lasting benefits for the whole nation.

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