Public expenditure management is the system governments use to allocate, manage and monitor their use of resources provided by taxpayers. This system includes budget preparation, budget execution, budget monitoring and auditing activities. By having good public expenditure management, governments can ensure that public funds are used efficiently and that the public gets value for their money.
What is Public Expenditure Management?
Public expenditure management is the process through which governments manage their public expenditures. This involves preparing a budget, allocating funds, monitoring cost and results, and auditing spending. Ultimately, the goal of public expenditure management is to ensure the best use of public resources and to promote economic growth.
The Components of Public Expenditure Management
Public expenditure management consists of three main components: budget preparation, budget execution and budget monitoring.
Budget Preparation
Budget preparation is the process of determining the scope, size and composition of public expenditure. This involves forecasting both revenues and expenditure and making decisions on how to allocate funds across different sectors of the economy. Budget preparation also requires assessing how spending can be aligned with overall policy goals.
Budget Execution
Budget execution involves the implementation of the budget allocated during the budget preparation process. This involves the transfer of funds to the responsible agencies and ensuring they are spending the money in line with the approved plan. It also involves tracking spending in order to check that resources are being used efficiently and that government objectives are being met.
Budget Monitoring
Budget monitoring is the process of tracking and auditing government spending. This includes checking that spending is in line with budget allocations, as well as assessing the results achieved from the expenditure. Budget monitoring is typically conducted by independently reviewing institutions, such as the Audit Office.
The Benefits of Public Expenditure Management
Good public expenditure management has numerous benefits for governments:
• Strategic Planning: By having a clear budget in place, governments can more easily identify trends and allocate resources to more strategic and growth-oriented initiatives.
• Improved Efficiency: Good budgeting allows governments to manage their funds more efficiently, resulting in more effective use of resources.
• Increased Accountability: By tracking and auditing public expenditure, governments can ensure they are delivering promised services and identifying areas of potential mismanagement.
• Reduced Waste: With better oversight, governments can reduce unnecessary or wasteful spending and ensure better value for money.
• Improved Governance: By regularly monitoring and auditing spending, governments can combat corruption and increase transparency
Good Practices of Public Expenditure Management
Good public expenditure management requires a combination of different practices and policies:
• Establishing Budgetary Boundaries: Governments should establish rules, frameworks and legislative provisions to set clear budgetary boundaries. This will help to ensure that funds are being allocated in an efficient and effective way.
• Strengthening Coordination: Governments should ensure that different departments are well coordinated in their budgeting and spending, to avoid resources being diverted away from priority areas.
• Rationalizing Spending: Governments should review existing expenditure regularly, in order to identify any redundant or excessive spending. This will help ensure public funds are used most effectively.
• Investing in Human Resources: Public expenditure management requires skilled and dedicated staff. As such, governments should invest in the training and professional development of such personnel.
• Empowering Civil Society and the Media: Civil society and the media play an important role in monitoring public expenditure. Governments should therefore encourage a culture of transparency, disclosure and accountability by empowering these third parties.
• Improving Information Systems: Governments should invest in developing and improving automated financial and performance management systems. This includes improving the accuracy and timeliness of the data being collected, as well as introducing automated systems for budgeting and spending.
Public expenditure management is an important part of achieving economic growth and combating poverty. Governments need to ensure that their public expenditure processes and policies are well managed, in order to ensure that funds are used efficiently and in line with overall policy goals. As such, governments should create and maintain processes that promote transparency, accountability and efficiency, and ensure that their public expenditure systems are supported by both adequate skills and effective technologies.