CENTRAL MINDANAO UNIVERSITY
UNIVERSITY TOWN, MUSUAN,
MARAMAG BUKIDNON
PUBLIC FINANCIAL MANAGEMENT AND
PUBLIC FINANCIAL REFORM
RONEL SUDARIA
Professor
ARCHIE PAQUIBOT BALTAZAR
Doctor of Philosophy
In Educational
Administration
1st Year
PUBLIC FINANCIAL MANAGEMENT AND PUBLIC FINANCIAL REFORM
I. SUMMARY
Public financial management and public financial reform deals with judicious
use of funds, and also ensures accountability and financial control. The
acquisition and disposal of resources by the government, be it federal, state or
local government. It is about government income and expenditure. It deals with
budgets which are statements about how a government plans to obtain income
and the ways a government plans to spend such income during a particular
financial year.
The subject matter of public financial management could be summed to
be the acquisition and disposal of resources by the government and it agencies
through proper management and control, through budgeting usually prepared
annually or ,through developmental plans for a specified period depending on the
government’s needs. At the heart of the design of an effective system of public
financial management, are the following principles: Democratic consent, Equity,
Transparency, Probity, Prudence and Accountability.
IMPORTANCE - More effective delivery of public services
If the finances of a public body are managed efficiently, we see a close
linked to poverty reduction as services are delivered more effectively and
markets can be regulated more fairly. Poor PFM encourages the spread of
corruption and allows waste which has a negative impact on the services offered
to the public.
IMPORTANCE - Boosts public confidence
If the system is transparent and well managed the general public tend to
have increased trust and confidence in the government.
IMPORTANCE - Demonstrate that services provided are good value
Citizens and stakeholders want evidence that public expenditure is being
spent in a way that represents good value for money.
IMPORTANCE - Helps economic stability
If public services are delivered effectively, a related improvement in
economic growth and equality can be tracked.
II. UNDERLYING ISSUES OR MAJOR IDEAS AND CONCEPTS
Public financial management is a creature of law. Due process is always
necessary. Results should be targeted towards the people at large. Public
accountability is the heart of Public financial management. Not only does
transparent reporting lead to greater accountability, clear and well communicated
data can increase the confidence of the general public in the services.
It is the fundamental pillar of governance. Healthy internal scrutiny leads
to improves decision making over time. This in turn leads to more effective use
of resources and improved accountability.
Stabilization of prices
Public finance avoids fluctuations and maintains stability in the prices of
goods and services. The government uses this tool for monitoring inflation and
deflation like situations in country. During the time of deflation, government
reduces the prices of goods for increasing demand by cutting down their tax rate.
Whereas during inflation, the government raises capital expenditure and tax rate.
Equal Distribution of Wealth
It helps in equal distribution of income and wealth among people in an
economy. Inequalities in income and wealth distribution is one the serious
problem faced by underdeveloped countries. Rich persons receive more and
more but poor are not even getting enough to fulfill their basic needs. Therefore,
for overcome this issue the government is required to spend on development
activities for poor peoples.
Economic Stability
Stabilization of country’s economy is another important role played by
public finance. The government uses taxation as a tool to control and improve
the economic conditions. When an economy faces prosperity and people have
more funds in their hands, it increases the tax rate. On the other hand, it reduces
the tax rate to bring up the demand during the deflation period.
Proper Allocation of Resources
Efficient allocation of resources is a must for the growth of every economy.
Public finance supports the government for optimum utilization of all-natural and
man-made resources. The government may impose lower tax rates or even
provide subsidies on highly desirables goods. Whereas, on goods which are less
demandable government may impose a higher tax rate.
Encourages Savings and Investment
Public finance is a tool that helps the government in motivating its people
for saving and investment habits. Peoples are generally not able to save their
income due to large spending on consumption activities leading to low or zero
investment. Government by decreasing the tax rates and giving some relief on
goods prices can encourage people for saving and investment activities.
Promote Exports
Export of goods and services is essential for earning sufficient foreign
exchange for every country. Public finance assists the government in promoting
exports and disfavouring of imports in an economy. Goods to be exported are
imposed to lower tax rate or even exempted from the tax category. Whereas,
imports of goods are restricted by charging higher tax rates on them.
Develops Infrastructure Facilities
Infrastructural development in a country requires the huge costs to be
incurred by the government. Public fiancé raises sufficient funds for the
government for meeting these expenses. It enables in providing better and well
maintained public amenities such as hospitals, roads, railways, educational
facilities, etc.
III. FINDINGS
The four importance of the public financial management namely; more
effective delivery of public services, boosts public confidence, demonstrate that
services provided are good value, helps economic stability are aims to improve
efficiency, accountability and transparency in public fund use in order to ensure
the direct, immediate, substantial and economical delivery of public services
especially to the poor. It is a central element of a functioning administration,
underlying all government activities. It encompasses the mechanisms through
which public resources are collected, allocated, spent and accounted for. Also
Good public financial management systems are important for democratic
governance, macro-economic stability, effective use of resources available and
poverty reduction. Good public financial management systems can also help
prevent corruption and foster aid effectiveness.
IV. RELEVANCE OR CONTRIBUTIONS TO THE EXISTING BODY OF KNOWLEDGE
Ola and Offiong (2008) the measures put in place to control people’s
money or funds. Ekpung (2001) The management of the flow of money or
financial resources through an organization (public), whether it is a company, a
school, a bank, or a government agency.
The subject matter of public financial management could be summed to
be the acquisition and disposal of resources by the government and it agencies
through proper management and control, through budgeting usually prepared
annually or ,through developmental plans for a specified period depending on the
government’s needs. At the heart of the design of an effective system of public
financial management, are the following principles: Democratic consent, Equity,
Transparency, Probity, Prudence and Accountability.
V. LIMITATION
The definition of public financial management tells us that strong public financial
management systems are essential to improve public service delivery, speed up poverty
reduction, and to achieve the sustainable development goals. Effective public financial
management systems also strengthen transparency and accountability, and financial
efficiency.
The importance of public financial management tells us also that it is a strategic
planning, organising, directing, and controlling of financial undertakings in an
organisation or an institute. It also includes applying management principles to the
financial assets of an organisation, while also playing an important part in fiscal
management.
The nature and scope of public financial management stated that public financial
management means applying management principles to manage the financial
resources of an organization. It simply involves planning, organizing, directing, and
controlling financial operations to manage the finance of an organization efficiently.
public finance deals with the income and expenditure of public authorities. It includes all
sorts of governments. That is, it deals with finance of the Government- Central, state
and Local. It also deals with the problems of adjustments of income and expenditure of
the government.
VI. THOUGTHS and OPINIONS
The main objective of public financial management is managing the basic needs
of the public like food, shelter, health, infrastructure, and education. All these are the
government's responsibilities so that the fundamental public needs are fulfilled and
contribute to the development of the economy. That is why income tax is very important
for us in order to spend for the government projects and to improve the economy in our
country.
VII. POTENTIAL FUTURE RESEARCH IDEAS
Administrators are encouraged to do their best to support the main objective of
public financial management in managing the basic needs of the public like food,
shelter, health, infrastructure, and education. All these are the government's
responsibilities so that the fundamental public needs are fulfilled and contribute to the
development of the economy. So that our country will become productive and
independent.
VI. References
https://pfm.gov.ph/public-affairs/2016-04-01/improving-public-infrastructure-is-key-
spending-area-for-2017-fiscal-agencies-tighten-link-between-planning-and-budgeting-
to-raise-potential-growth-reduce-poverty/
https://books.google.com.ph/books?
hl=en&lr=&id=uh4HtKQGV0UC&oi=fnd&pg=PA77&dq=public+financial+reforms+in+phil
ippines&ots=aO_8Rr94no&sig=i-
75sJ2F8K_luGct2f2mKZ9vmn0&redir_esc=y#v=onepage&q=public%20financial
%20reforms%20in%20philippines&f=false
https://pfm.gov.ph/ckfinder/userfiles/files/FOR%20PRINTING%20AAR
%20Brief_030414_AArban_RO.pdf
https://taxreform.dof.gov.ph/tax-reform-packages/p1-train/
