What’s public financial management?

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Public financial management is the administration of funds used to deliver public services. Depending on the level of government and the specific nation, these can range from a city’s water and sewer service to a national health plan. This is a special field within the broader discipline of financial management, focused on delivering services as effectively and efficiently as possible to maximize benefits for residents. Subject matter specialists may be directly involved in the administration of the agency, as well as in legislation, policy development, and enforcement of the regulatory frameworks used to control public spending.

Governments provide a variety of services to citizens to improve the quality of life and the function of society. These can include emergency services like firefighting, law enforcement, and medical care, along with infrastructure like roads and a power grid. Education, business subsidies, and other measures to improve communities are also part of public finances. Large sums of money can be involved and managing them responsibly ensures that the funds will continue to be available while the greatest number of citizens benefit from government activities.

In the discipline of public financial management, people analyze documented needs and expenditures for different public services. They can perform analysis to identify areas of greater or lesser efficiency. Some programs can be ranked by importance to prioritize spending. For example, a government may want to allocate funds to law enforcement before arts programs to ensure that social order is maintained.

Sources of revenue for public finance activities may include taxes, fees, and fines. In public financial management, analysts prepare revenue projections and discuss ways to increase or manage revenue more effectively. This may include auditing or investigating signs of fraud if these activities are likely to yield results in terms of increased revenue or less waste. Governments can also make investments to increase their income, under the advice of financial managers who can decide how and where the investments should be made.

There are some special concerns with public financial management that are not present with private sector spending. One is public responsibility. Members of the public expect to see the accounting to show how their money was raised and spent. They can participate directly in policy making at the ballot box, through petitions, and in lobbying efforts directed at specific agencies or legislators. Another problem is the need to balance the public good, and what will benefit the most people most of the time, in public financial management.

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