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

What is public finance management?

In public finance, various government and quasi-governmental organizations manage national income and expenditures to manage deficits. The value of money is taken into account nationally and locally. This involves processes such as resourcing, allocation, revenue collection and so on. It plays a crucial role in ensuring public finances are being used responsibly to meet the end needs of the public. The poor, whose lives are most often affected by multiple government policies, are especially susceptible to the consequences of poor financial management. 

 

Importance of strong public Finance Management

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

It is also crucial to a sound public financial management system that a government's operations are clearly explained, understood, and accessible. For effective management of public finances, fraud and corruption must be eradicated first.

 

Types of Public Finance:

 

Public Revenue

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

 

Public Expenditure 

The government spends public money on education, health care, and defence as part of public expenditures in public finance. This process involves proper budgeting and accounting to ensure equal distribution of resources to the public. 

 

Public national Debt 

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

·        According to maturity < 5 years

·        Types of the issuer

·        Location of debt(foreign or local jurisdiction)

·        Securities that are negotiable or non-negotiable.

 

Public Budget

A state's budget predicts its expenditures and revenues for the upcoming fiscal year.. Service fees, taxes and external loans are some sources of public revenues.

 

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

 

Higher Taxes

Poor financial management can lead to a budget deficiency which can result in higher taxes for citizens. This turns burdensome for low-income populations who rely heavily on public services.

Unsustainable management of finance

It is possible to endanger the sustainability of public service provision by implementing poor public financial management.

Limited Economic opportunity:

This limits economic opportunities like job creation and investment, especially in impoverished areas. This can perpetuate the cycle of poverty and limit economic upward mobility. 

 

Mainstream gender inequality over finance

The gender access budget cycle is mainstreamed in various ways by governments in PFM.

Reduces availability of essential public services:

Poor financial management can result in a shortage of funds in providing basic amenities which in turn will impact the quality of life of citizens. 

Increase public debt

Taxes will rise, and welfare programs must reduce to meet the debt. This can breed corruption within government sectors ultimately leading to a significant loss of public funds. 

Economic Instability

Poor financial management can hinder the growth of job opportunities, and investors will be less likely to invest affecting the financial stability of a country. 

 

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

 

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

 

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

 

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

 

Discuss monetary issues with Elected Representatives: They are accountable to constituents and can play a vital role in ensuring transparency and accountability for public funds by being the voice of helpless people. 

 

Technology has made public monitoring of funds easy: Government websites are platforms where the public can assess financial reports, audit reports and data on government expenses.  

 

Improved ways of managing public finance (present and future)

 

·   Most Public Finance Management(PFM) should be properly planned. PFM targets anti-corruption reforms by updating existing laws and identifying valuable assets and liabilities hence it should be properly planned. 

 

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

 

· Setting clear guidance and proper financial management: adherence to established documented procedures, and periodic supervisory will generate trust in people to invest in public funds.

 

·  The use of technological innovation is increasingly important in the Integrated Financial Management System(IFMS). 

 

·  Blockchain technology will create transparent and secure ledgers for recording government public finance expenditures. 

 

·   Digital governance platforms can derive various data from various government departments into a single platform, where finances can be tracked, and provide alerts whenever there is a deviation or unnecessary expenditure of budget.  

 

Conclusion

If public finance continues to be managed poorly, it can have severe impacts including, inadequate access to basic amenities, reduced economic growth, debt burden, corruption and so on resulting in loss of public funds dragging the poor to the poorest. Only strong financial management like transparency, and efficient accountability can foster economic and public welfare. The need for competent and proficient people(financial officers) with strong financial management skills can ensure the stability of finance used at the right time and right purpose. 

 

Consider looking into Finance assignment help by Academic Assignments if you have found this blog useful and need assistance with your finance assignment. Your finance assignment will be written by qualified professionals who will conduct thorough research and produce quality work. Remember, academic goals can be achieved with the right support.