NAME: PAKEPO ISSAC: ID: 20195294 [LLB4]

QUESTION #1
The Public Finance Management Act is an important document used to guide the financial
operations of the public sector. Explain in detail what the act is? Why the act created and
its primary function or purpose?

The Public Finance Management Act1 was created to regulate financial management in the
national government and provincial governments; to ensure that all revenue, expenditure, assets
and liabilities of those governments are managed efficiently and effectively; to provide for the
responsibilities of persons entrusted with financial management in those governments. Public
financial management refers to the collection, management and expenditure of public finances
throughout an economy. The core objective of public financial management is to improve
citizens' lives through better management of public money. Strong public financial management
processes and systems are essential for effective and efficient delivery of public services,
transparent public finances, and trust between government and citizens. Public finance
Management Act is an important instrument for governments to use in balancing long-term aims
with short-term requirements. Its successful implementation can improve citizens’ quality of life
by promoting economic stability, responsible environmental management by public authorities,
health care initiatives, and other public services tailored to citizens’ needs, as well as societal
issues like income inequality and access to education.

The PNG Constitution contains articles covering financial matters such as taxation, loan raising,
public accounts, national budget and audit. The Public Finance Management Act (1995) details
procedures relating to the Consolidated Revenue Fund and the Trust Fund, and is the legislative
authority for the management of these funds.

The Public Finance Management Act defines the National Budget and allows for transfers
between appropriations. The Act also allows for the issue of Finance Regulations and
Instructions. There is a Centralized Budget System in place and no centralized Asset
Management and Control System. There are five Information Technology systems in place. The
Public Accounts Committee has not met for at least three years although the Constitutional office
holders have been appointed. The main role of Inspector is to ensure proper financial
management and accountability of public resources by providing adequate audit and inspection
coverage of government agencies, and through enforcement of compliance with financial
procedures, rules, and regulations.

In line with the powers and authority provided under the Act and any that may be delegated by
the Minister and the Secretary, the Inspectors conduct audit inspections and investigations into
financial operations of the national departments, statutory bodies and Provincial and Local-
level Governments.
[Date]

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Public Finance Management Act 1995

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ELEMENT S OF PUBLIC ADMINISTRATION: TUTORIAL #1
QUESTION #2

Sate and explain 4 functions of Accountability, as discussed in class.

Accountability is the process of ensuring that public money and powers must be used effectively
and with honesty for only public services and country2. Accountability makes sure that there is
no misuses of any public power or funds by the public administrators and government itself. This
brings trust relationship between the public and the government and its departments.
Accountability is a process which must be adopted in every Government departments of the
country3.

Some of the key roles/functions of accountability include:

1. Improve a company’s governance-Accountability, alongside other key underpinnings, such

as integrity and transparency, has proven to be the driving force behind a good governance
arrangement. Reporting the returns on a portfolio of investments in an accountable and
transparent manner reduces the chances of corporate mischief, implying that the administration of
a company is based on good governance.

Provide oversight-The two elements of accountability ensure that responsibility is delegated and
not merely forsaken. It suggests that there is a hierarchy in which the principal retains the
consequences of the responsibility. However, the powers that are necessary to achieve objectives
usually limit the allocation of roles to other parties.

3. Maintain and enhance legitimacy-A clear legal ground for various accountability
mechanisms can generate the legitimacy of a company. If the actions of a company bear
legitimacy in the eyes of investors, it can effectively use the granted independence. Conversely, a
company’s independence will be short-lived if its activities lack legitimacy. Companies are
accountable for their financial activities to safeguard legitimacy and maintain autonomy.

Improve performance-Although accountability is mostly concerned with financial monitoring, it

is also concerned with using internal controls to enhance performance. A sound management
system defines the rules and actions against which reviews are subjected. It, as a result,
minimizes the scope for ad hoc and, instead, enhances financial performance. For example, the
condition under which a company may be subjected to litigation is captured by a structured
judicial review. Thus, a well-designed accountability mechanism can help strengthen a
company’s independence.
[Date]

2
Fleming and Spicer, (2007). Strategy: Theory and Practice
3
Mckinney, J.B, & Howard, L.C (1998). “Balancing power and accountability, p. 163-170

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ELEMENT S OF PUBLIC ADMINISTRATION: TUTORIAL #1
 QUESTION #3

Discuss the Organic Law on Provincial and Local Level Government and explain how it
provides an enabling environment for the provision of goods and services.

Organic Law on Provincial Government 1976 (OLPG) and the Organic Law on Provincial
Governments and Local-level Governments 1995 (OLPGLLG)4 have fundamentally transformed
the political and administrative structures governing the country. This changes bring much light
on the key drivers’ of fundamental reforms in PNG. Wide-ranging changes in national and
subnational governmental arrangements have been undertaken in PNG in recent years with the
aim of improving service delivery at all levels of government. Since 2012, there has been a major
allocation of public resources, through Services Improvement Programs (SIPs), to the provinces
through the Provincial Services Improvement Program (PSIP), to districts through the District
Services Improvement Program (DSIP), and to Local Level Governments (LLGs) through the
Local Level Government Services Improvement Program. These SIP grants are intended as
funding for projects and are not available for recurrent expenditure such as salaries and wages.
However, as SIP funds are delivering services in the form of infrastructure supporting services
such as transport, they are also of concern as regards the effectiveness of services delivery.

In February 2014, the PNG Parliament amended the OLPGLLG to remove the Joint District
Planning and Budget Priorities Committees. These were replaced, under the District
Development Authority Act, passed in December 2014, with District Development Authorities
(DDAs) as the mechanism for the expenditure of development funds in districts and LLGs. A
DDA is a statutory authority, a legal entity that can enter into contracts for works and services,
hold property, sue, and be sued. A DDA retains the functions of a JDP&BPC but is also
responsible for any service delivery functions and other responsibilities specified in a national
Ministerial Determination (a legal document that sets out the responsibilities for each level of
government with respect to the funding and delivery of services). DDAs were rolled out in most
districts across PNG in 2015. Under the new arrangements, part of the provincial budget may be
allocated to districts, and the district administrator—also now the chief executive officer (CEO)
of the DDA Board—may be delegated power by the relevant minister over district services such
as law and justice, education, health, infrastructure, water supply, and agricultural extension. The
financial delegation (approvals of expenditure) for CEO/district administrators was increased
from K5, 000 to K500, 000. However, the DDA does not replace the provincial government and
cannot perform any of its functions in a way that is inconsistent with the plans or work of the
provincial government

Efforts to improve service delivery in PNG by devolving the activities to the provincial or
district level have long suffered the widespread problem of a mismatch between the allocation of
responsibilities and the flow of funds from the central government to the periphery authorities to
carry out their responsibilities.
[Date]

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OLPGLLG 1995

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ELEMENT S OF PUBLIC ADMINISTRATION: TUTORIAL #1
REFERENCE/BIBLIOGRAPHY

 Axline, W (1986). Decentralization and development policy: Provincial government and

the planning process in Papua New Guinea. Port Moresby: Institute of Applied Social and
Economic Research.

 Axline, W. A. (1993). Governance in Papua New Guinea: Approaches to institutional

reform. Port Moresby: Institute of National Affairs and National Research Institute, Port
Moresby.

 Bahl, R., & Linn, J. (1992). Urban public finance in developing countries. New York:
Oxford University Press.

 Bird, R. M., & Smart, M. (2002). Intergovernmental fiscal transfer: International lessons
for developing countries. World Development, 30(6), 899– 912.

 Bjornestad, L. (2009). Fiscal decentralisation, fiscal incentives, and pro-poor outcomes:

Evidence from Vietnam, ADB Working Paper No. 168, Asian Development Bank, and
Manila.to 1995 but is now a sub-district of Bulolo.

 Fleming and Spicer, (2007). Strategy: Theory and Practice

 McKinney, J.B, & Howard, L.C (1998). “Balancing power and accountability, p. 163-170

[Date]

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ELEMENT S OF PUBLIC ADMINISTRATION: TUTORIAL #1