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Managing Financial Resources in the Public Sector



There have even an increased focus on ways that will improve qualityof public finance management all over the globe. Most of thecountries in the developed and the developing world have laidimpressive achievements which strengthen public financial managementin governance. Public sector landscapes have experienced rapidchanges with an increased emphasis on fiscal management anddiscipline that do prioritize expenditures and value for money. Dueto that, government, international donors, local institutions,accounting bodies and regulators have been working together toachieve a long lasting transparency, improvements and accountabilityof public finance management (Mir &amp Sutiyono, 2013).

This paper is set to explore on how public finance management may beimproved with ways of strengthening its capacity in public sectoreconomies. It will explore common issues effective practice andlesson learnt in government, regulators and stakeholder interventionsaiming at improving public financial management.

Is Financial Management In Public Sector Important?

Public finance management is essential in improving quality of publicservice outcomes. Public finance management critically affect ways inwhich funding can be applied in addressing local and nationalpriorities, availability of resources that are used in investment andbeing a cost effective tool in public sector. Public financemanagement is more likely to increase general public trust especiallyin organization of public sector with strong financial stewardship,transparency and accountability on use of public funds. Mainly, it isessential for the public committee to get the rights since it impactswith broad range of government areas including:

  • Governance- addressing issues on accountability and transparency

  • Operation management- looking at performance, budget management and value-for-money

  • Fiduciary risk management- addressing on control measures, oversight and compliance.

  • Aggregate financial management- addressing on fiscal sustainability, resource allocation and mobilization

Additionally, having an effective public finance management will bequite important especially on decision making process. There shouldbe use of accurate financial information which will ensure there areeffective resource allocations. Well defined financial management inpublic sector is responsible for protecting, developing, andmaintenance, proper use of resources which will take care of economygrowth with increased income which is as a result of effective andefficient management of national resources.

As stated above, financial management in public sector do help inproviding useful information which is used by decision makers tointroduce better control program that prevent abuse while creatingincentives on goods and services to general public. Basically,financial management in public sector do assist public sector incollection of money, spending of money, allocation of money, weighingcost and benefit of implementing certain programs, accounting forfunds, reporting how funds have been utilized, and planning for longterm operations (György, 2012).

Key Features That Are Evident In Public Sector

Financial management in public sector involves way in which funds arecollected. Most of public sector funds are collected through taxationprogramme, sales of goods, fees and transfers.

Financial management in public sector considers allocation ofresources since income that is generated is not connected to anyspecific goal. Public sector funds are consolidated in a ConsolidatedRevenue Fund (CRF) which is subjected to democratic decision makingprocess which distribute the funds across all arranges activities.This is what is referred to as public sector budgetary process.Mainly there are the exemptions that are given to this rule wherebycertain taxes and fees are directed to certain specific programs.

Budget is vital in public sector management since it act as a toolthat judge government financial performance. Committees of publicsectors are held responsible for accounting performance which isrelative to the budget (Gomes &amp Yasin, 2013).

Finance management in public sector involves ways of spending money.Delegated committees and officials are given mandated to spend thepublic sector funds directly to the specified purpose in which moneyhave been allocated to. Hence, finance management considers ways ofhaving better controls that are put in place to monitor public sectorexpenditures. Public sector must ensure that, they frequentlymonitor and report on flow of funds. This controls and reporting willensure actual financial timelines within outlined laws which ensureindividual are connected to success or failures in public sectors.Management information systems have supported these roles ofmanagement by ensuring the public sector officials area aware oftheir main level of management.

Budget Cycle

In public sector, there are three type of budget that plays at alltimes within past, present and future. Officials of public sectorhave to implement immediate concerns connected to management of fundsfor the current fiscal year. This carries a realm and use of controlof funds, program management and cash management. Officials as wellhave to take a continuous participation in part of planning processwhich will fairly secure public sector funds for the next comingyears. This is referred to as expenditure planning process which laypolicy planning’s cycle within strategic exercise in theorganization. Basically, this is essential for development of futurebudget. Officials are supposed to account for past use of publicsector funds basing it on past budget and ways at which funds havebeen spent.

Third budget life account for past performance which is critical topublic sector since most of the budgeting process is incremental innature. This is due to changes that have small increments based onprior year’s level of national resources, For example, 3 percentincreases per annum with no identifiable change on program funddistribution. Most of public sector organization creates their budgetbased on past performance and allotment of funds. How much money wasactually spent in the past program is an essential factor forbudgeting (Antipova, 2013).

Budget Information

Budgeting program vary within a considerable complex modes. Thisusually depends on the main purpose in which the budget was createdfor and how funds will be used. While seeking the elaborate way thatwill display the best budget information, there are simple approachesthat have useful with vital intent and limitations:

  • Performance budget

  • Program budget

  • Line budget

  • Functional budget which integrate the former two budgets


Most public sectors practices use different forms of budgeting tomeet the main goals for implementing budget. Good budgeting outcomeconsider a broad definition of political, managerial, communication,financial and planning dimensions. Good budgeting makes it quiteclear that, planning process is not simple to the exercises thatconnect balancing of revenues and expenditures in a strategic nature.Plans must encompass multi-year financial and operational decisionson allocation of resources within identified goals. Finally, goodbudgeting promotes incentive to public sector management witheffective communication with stakeholders.


Antipova, T. (2013). Performance Audit in Budgetary Entities. GlobalConference on Business &amp Finance Proceedings, 8(2), 133-137.

Gomes, C. F. &amp Yasin, M. M. (2013). Managing Public SectorProjects in Portugal: Meeting the Challenge through EffectiveLeadership. Journal of Leadership, Accountability &amp Ethics,10(2), 113-122.

György, A. (2012). Agency Problems in Public Sector. Annals of theUniversity Of Oradea, Economic Science Series, 21(1), 708-712.

Mir, M. &amp Sutiyono, W. (2013). Public Sector FinancialManagement Reform: A Case Study of Local Government Agencies inIndonesia. Australasian Accounting Business &amp Finance Journal,7(4), 97-117.