PUBLIC FINANCIAL MANAGEMENT

A well-functioning public financial-management system is critical to efficient and effective service delivery. It provides relevant and reliable financial information in a timely and consistent manner for control and accountability at all levels. It supports and reinforces other accountability systems regarding budget execution, and thus has a central place in the fight against corruption.

The role of the public financial-management system is to facilitate the planning and budgeting process of the public sector, the recording of financial information, and the controlling of budget execution. It concerns both the revenue and the expenditure side of the budget. The broad objective of a public financial-management system is to achieve overall financial discipline, allocation of resources to priority areas, and efficient and effective use of public resources for the achievement of results.

Financial management is the active use of financial and other information to plan activities and transform inputs and resources into outputs. This is guided by the relevant legislation, the organisation of work, the procedures and systems, the administrative and accounting tools (including IT systems), and the control systems. Procurement of goods, works and services is an important element of a public financial-management system.

There has been a shift in the approach to public-sector management from rule-based administration to focusing more on results and value for money in Danish partner countries as well as in many other places. This has strengthened awareness of the need to enhance public financial-management systems in line with this novel managerial approach. Furthermore, the donors’ commitment to increasing the use of their partners’ national procedures and systems for channelling financial assistance has highlighted the need for sound public financial management. This, in turn, has drawn the donors’ attention to support for public financial-management reforms in partner countries.