Public Financial Management

Recent years have seen major initiatives in public financial management (PFM) in India. The most comprehensive recommendation in this area has been that of the 12th Finance Commission for a transition to accrual basis of accounting at all levels of government. This transition requires a permutation of momentous efforts in the areas of accounting policies and standards, a policy of acknowledgment and measurement of asset and other financial elements, supported by process re-engineering and capacity building to guide the government personnel in an enhanced way.

Key questions about the finance function within government are:

• What does the future hold for government finance?

•  How can finance leaders in the public sector take their organizations from where they are today to a new level of performance, creating greater value for the citizens they serve?

In the current scenario, every country’s Governments are facing increasing pressure to improve transparency and accountability in fiscal management and also improve service delivery of various schemes that the government is designing for the benefit of its citizens. Readily available fiscal data will be a key determinant of many public  finance reforms, including actions to direct resources to achieve particular policy goals, e.g., poverty reduction; enlarge the coverage of the budget; introduce a medium-term fiscal perspective in the budget; produce information on tax expenditure, fiscal risk and contingent liabilities; implement a program-based budget framework; implement controls in expenditure management and improve the quality of cash and debt management.

Although there was a significant progress in streamlining transaction efficiency, government’s finance function has failed to meet the needs of the larger enterprise as systems have been implemented in silos. Integration of silos has not been adduced leading to multiple truth & lack of cohesiveness in decisions.

Important transaction based control systems like expenditure management, receipt management, debt management; cash management and so on has been given the first preference to implement by some of the Countries like Argentina, Brazil and others.

A planned and well executed e-governance system has the potential to advance financial management by focusing on change management, procure rationalization, government order change, selection & realization of input solution and finally having a view of setting this as an going integrated IT service. The real benefit can be reaped only when the PFMS is implemented in totality with all integrations in place, giving rise to single source of truth.

There are a number of challenges to the successful implementation of e-Governance projects:

1. How can new initiatives, e.g. support for the design and governance issues of e-government,  infrastructure and ICT strategies, revision of legal frameworks, simplification of processes, change management strategies, personnel training development of window government.

2. How to ensure sufficient transfer of ownership of the e-government projects once they are developed?

3.  How to achieve sustainability? As projects close, a number of countries have encountered problems maintaining the pace of reforms and sustaining their achievements.

Public Financial Management being a part of e-Governance faces similar challenges. Therefore, we should consider these while dealing with/implementing similar programs in e-Governance space.

Author - Arvind Mehrotra, President, Asia-Pacific & Middle East, NIIT Technologies