Robust and resilient public financial management essential to manage present and future risks
LAHORE ( Web News )
Achieving the UN Sustainable Development Goals (UN SDGs) depends on the effectiveness of governments and their management of the public purse.
There are important lessons to learn from the Covid-19 crisis for governments and the resilience of their approach to public financial management (PFM), says ACCA (the Association of Chartered Certified Accountants) in a new report Rethinking public financial management .
Launched to coincide with ACCA’s annual Virtual Public Sector Conference (1 – 2 December 2021), the report explains that a government’s ability to do anything depends on the strength of its PFM system – how it prepares budgets, obtains financing, spends money, and keeps its accounts.
And to meet ongoing challenges such as Covid-19 and meeting the UN SDGs, it’s essential that governments have the right, skilled people in place to do this very necessary work. Alex Metcalfe, ACCA’s head of public sector and co-author of the report explains: ‘It’s a significant risk to a government’s success if it doesn’t have the right number and quality of public finance professionals. To benefit from their improved PFM systems, governments may need to make a significant and sustained investment in their PFM systems, and also in competent public finance professionals who will advise on future decisions.’
Gary Bandy, a PFM specialist and co-author adds: ‘Financial management is critical to the delivery of public services and sustainability of economies. The pandemic has led to lessons for governments about what did and what didn’t work as well as expected. We offer recommendations for a way ahead as it would be a real opportunity missed to learn from the pandemic if governments returned to a pre-Covid status quo for their PFM arrangements.’
The report sought views of 1,500 ACCA members and affiliates globally, asking them how they felt governments responded to the Covid-19 pandemic and how PFM must now evolve to deal with future crises.
Respondents also said that the four most commonly faced challenges by governments were:
responding to the financial needs of individuals and businesses (45%)
being able to transition to remote working (42%)
having the necessary technological/ digital capacity (42%)
maintaining accountability and transparency of government spending (41%)
Respondents in North America, the Middle East and Western Europe were much more positive bout the effectiveness of their public sector institutions than respondents from other regions. Looking at sectors, public sector respondents – 62% – were much more likely than those in the private or not-for-profit sectors (42% and 37%) to agree that their government had made an effective response to the pandemic.
Respondents offered three main areas for development of PFM:
improving transparency and accountability of government spending
better prioritisation of resource allocation, and
intensifying the focus on risk management
Relatively few respondents included tracking climate change as one of the top priorities for development, but governments must rebuild and manage the public finances in a way that contributes to the climate challenge.
Alex Metcalfe concludes: ‘There isn’t a one size all approach tackling the challenges, and each government will have its own fiscal and economic issues to solve. The path to return to the new normal will be different because each government is in a different place as a result of its Covid- 19 responses. The long-term implications of Covid-19 spending – significantly increased government debt or other liabilities in most cases – means difficult policy choices will have to be made.’