Business Finance Headline News Nigeria Special Report

Importance of Financial Management in Government for Sustainable Economic Development

Financial management in Government, otherwise known as public sector finance involves how government raises, applies and manages its funds.

It is important to stress that Government has to perform duties to the nation, as a result, there must be a means of livelihood called money.

The money required by the government to perform its legitimate duties must be obtained from somewhere, and utilized on something.

Also, considering the human nature in modern times, the activities of government are no longer confined to mere maintenance of peace, security, law and order but also economic, industrial and social schemes have formed an integral part of the activities of a modern state.

Key Principles and Practices for Effective Government Financial Management

Financial management is therefore a critical capacity and responsibility of governments, enabling them to deliver on their priorities and fulfil promises made to citizens.

Good financial management is vital for the government to achieve value for money from all public expenditures, reduce the government budget deficit, and improve budget structure and reporting.

It is no more news that public financial management is not only crucial in meeting fiscal aims, monitoring progress against targets and effective utilization of resources, but a good system that aids the government in setting future priorities and ensuring fiscal sustainability.

It also ensures that all ministries, departments and agencies in the public sector are held accountable for the financial records, even as all receipts and payments are properly traced.

In spite of its importance in the economy, the sector has failed to live up to expectations of bringing the policies and programs of the government to fruition due to the mismanagement of public funds associated with the misuse and potential loss of funds.

Mismanagement and Fraud in Public Sector Financial Management

Mismanagement is therefore the highest type of fraud in the public sector as people intentionally divert public funds for personal aggrandizement without any fear or prick of conscience.

Cases of financial indiscipline are very rampant nowadays as people seem to put aside their moral values, chieftaincy titles, academic qualifications, and political or economic status in life and of course, they ignore their respective religious teachings to perpetuate fraud.

This type of fraud is committed through several means, such as outright abscondment of corporate or government assets for personal use, payment of salary to ghost workers, payment of dubious purchases and contracts and inflation of contract amount.

Others include, the use of office impress for personal allowance, making payment against uncleared cheques, forfeiture of deceased staff gratuity and pension benefits, misuse of medical allowances and reimbursements, and many more.

It should be noted with regret, that, misappropriation of funds either in the public or private sector leads to grave consequences, such as high rate of poverty among citizens, insecurity, lack of infrastructural development, poor access to medical health care, education and other basic amenities, just to mention a few.

Consequently, there should be an honest application of funds and compliance with proper procedures, ensuring that such funds are spent on properly approved items and within the budget limit.

Budget Structure and Reporting

In the same vein, the government should always engage people of integrity, develop and share fraud policies, implement internal control, and of course conduct periodic reviews. Good enough, financial regulations had set out detailed rules and regulations on how to collect, keep, and disburse government funds on a day-to-day basis.

It behoves officers of the government to familiarize themselves with those functions and be properly equipped in the prudent management of government funds for the sustainable economic development of the country.

Written by Maurice Asuquo, a Public Affairs Analyst; Editing by Saadatu Albashir