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PFM Architecture: Concept and Processes Babu Ram Subedi

PFM Architecture: Concept and Processes Babu Ram Subedi. H andling of Public P urse for Better Results . Essence of PFM. . What is Public Financial Management ? . The Concept: F inancial management is all about money PFM is concerned with handling of public purse

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PFM Architecture: Concept and Processes Babu Ram Subedi

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  1. PFM Architecture: Concept and ProcessesBabu Ram Subedi Handling of Public Purse for Better Results

  2. Essence of PFM .

  3. What is Public Financial Management ? The Concept: • Financial management is all about money • PFM is concerned with handling of public purse • It should serve the interest of the people at large • It consist of public accountability • Process is crucial in PFM

  4. PFM in Definition " Public management is a process relating to handling of the public money for better results". • Achieving results • Managing risks • Prudence behavior

  5. The PFM Cycle

  6. Characteristics of PFM • Handling of public purse • Public Expenditure is the key • Public interest maximization • Due Process of law :creature of law • Public control and Scrutiny: parliamentary control • Public accountability:answer to the people • A quest for fiscal sustainability • Fiduciary risk management

  7. Objectives • Aggregate fiscal discipline • Efficiency in resource allocation • Operational efficiency : Economy Efficiency Effectiveness Due process of law

  8. Principles • Public value maximization • Parliamentary approval • Due process of law • Public accountability • Prudence • Due care: public trustee • Principle of fiscal sustainability • Independent audit

  9. Nepalese PFM System • Constitutional back up • Objective of value for money • Results orientation • Strong parliamentary control provisions • Personal responsibility • constitutional audit provisions • Due process of law

  10. Challenges • Political encroachment • A culture of sharing public money for personal use • Strong legal provisions vs weak implementation • Large amount of money outside the budget • A compromise over results • weak humanbase

  11. PFM Reforms Initiatives • Budgetary reforms: MTEF and MTBF • Planning reforms :MfDR • Treasury Reforms: TSA • Accounting System reform :NPSAS • Tax reforms: VAT and use of IT in tax administration • Donor harmonization practices • IT dominance : FMIS/IFMIS • PEFA framework • Audit reforms

  12. Gaps • Gap between institutions and practices • Discontinuity of parliament • High focus on hardware • Growing practice of financial responsibility for dishonests: Distortion of ethical values • Severe human resource capacity gap • Cosmetic touch of foreign aid ; inefficiency and out drain • Results neglected • Severe revenue leakage • Results and process also overruled in local the bodies/GOEs

  13. Way Forward • Simultaneous intervention both in hardware and software • Invest on human resources • Adherence to the institutions and results • Promotion of the ethical standards • Scrutiny based on the results • C/B analysis of foreign aid • Internal capacity enhancement( revenue gen.) • Construtive role of parliament

  14. THANK YOU by Babu Ram Subedi Member Secretary PEFA Secretariat, Nepal

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