Poor management of public finances: what does it mean for the public? (2024)

What is public finance management?

Inpublic finance, various government and quasi-governmental organizations managenational income and expenditures to manage deficits. The value of money is takeninto account nationally and locally. This involves processes such asresourcing, allocation, revenue collection and so on. It plays a crucial rolein ensuring public finances are being used responsibly to meet the end needs ofthe public. The poor, whose lives are most often affected by multiple governmentpolicies, are especially susceptible to the consequences of poor financialmanagement.

Importanceof strong public Finance Management

Ensuresresources are available to provide adequate public services education, care,health and infrastructure. A strong public financial management would exhibitadaptability that makes it simple for the targeted sectors to change.

It is also crucial to a sound publicfinancial management system that a government's operations are clearlyexplained, understood, and accessible. For effective management of publicfinances, fraud and corruption must be eradicated first.

Typesof Public Finance:

PublicRevenue

Thisrefers to money collected by the government from various sources such as taxes,duties etc. Governments rely on it for funding.

PublicExpenditure

Thegovernment spends public money on education, health care, and defence as partof public expenditures in public finance. This process involves properbudgeting and accounting to ensure equal distribution of resources to thepublic.

Publicnational Debt

Nationaldebt or public debt is debt owned by the national government in the form of acounty or corporation in the UK. Public debt can be classified in four ways,

·Accordingto maturity < 5 years

Howpoor finance management affects the public (especially poor people)?

HigherTaxes

Poorfinancial management can lead to a budget deficiency which can result in highertaxes for citizens. This turns burdensome for low-income populations who relyheavily on public services.

Unsustainable management of finance

It is possible to endanger thesustainability of public service provision by implementing poor publicfinancial management.

Limited Economic opportunity:

This limits economic opportunities likejob creation and investment, especially in impoverished areas. This canperpetuate the cycle of poverty and limit economic upward mobility.

How canthe public monitor the government's fair use of public money(management)?

Scrutinize Public Budget: The public can assess the public budgetby scrutinizing through peaceful voting, how public officials' salaries andexpenses and hold them accountable for misuse of funds.

Participate in Public audits: Public audits can provide you with anoverview and review of financial statements.

Less privileged people must file a Rightto Information (RTI)to access information on the management, allocation and utilization oftheir funds.

Discuss monetary issues with ElectedRepresentatives: They areaccountable to constituents and can play a vital role in ensuring transparencyand accountability for public funds by being the voice of helpless people.

Technology has made public monitoring offunds easy: Governmentwebsites are platforms where the public can assess financial reports, auditreports and data on government expenses.

Improvedways of managing public finance (present and future)

·MostPublic Finance Management(PFM) should be properly planned. PFM targetsanti-corruption reforms by updating existing laws and identifying valuable assetsand liabilities hence it should be properly planned.

·Thewhole system approach can be used to improve efficiency. A complete system approaches consistent functioning whenaccounting and budgeting are too frequently used as metrics for resource flow.

·Settingclear guidance and proper financial management: adherence to establisheddocumented procedures, and periodic supervisory will generate trust in peopleto invest in public funds.

·Theuse of technological innovation is increasingly important in the IntegratedFinancial Management System(IFMS).

·Blockchaintechnology will create transparent and secure ledgers for recording governmentpublic finance expenditures.

·Digitalgovernance platforms can derive various data from various governmentdepartments into a single platform, where finances can be tracked, and providealerts whenever there is a deviation or unnecessary expenditure of budget.

Conclusion

Ifpublic finance continues to be managed poorly, it can have severe impactsincluding, inadequate access to basic amenities, reduced economic growth, debtburden, corruption and so on resulting in loss of public funds dragging thepoor to the poorest. Only strong financial management like transparency, andefficient accountability can foster economic and public welfare. The need forcompetent and proficient people(financial officers) with strong financial management skills canensure the stability of finance used at the right time and right purpose.

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