FinanceA global Grant Thornton Public Sector survey found that innovative, transformative practices in government public financial management are being sustained, but that improvements are still needed. According to the data, the real problems lie in the practical delivery of changes and improvements.

While 68% of public sector financial managers globally confirmed that their countries have a formal PFM reform programme in place, critical gaps exist in the ability to deliver reforms, as 38% of respondents cited technical assistance issues and 33% cited employee training and challenges with new legal frameworks as key issues requiring attention.

The study found that the battle now lies in delivering change in practice.

The survey, entitled “Innovation in Public Financial Management in an increasing complex and uncertain global environment” researched more than 235 Public Financial Management (PFM) leaders worldwide.

In the case of South Africa the survey notes that the government’s commendable public financial management (PFM) reform programme has yet to result in any significant positive impact on financial controls.  According to the survey, this is due to the ongoing lack of skills of public sector financial managers who are primarily responsible for the implementation of these regulations.

Cashmore Muchaonyerwa, Director: Public Sector Advisory at Grant Thornton South Africa, says that while government has done much to put in place comprehensive mechanisms in the form of legislation and regulation, a lack of skills is still hampering most public sector institutions particularly municipalities.

 

Understanding of the importance of PFM sorely lacking

In addition to practical difficulties, the biggest issue ahead would be finding the political commitment needed to support more difficult innovations on the agenda. Muchaonyerwa said that specifically in South Africa, legislation such as the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) was ground breaking.

“Our biggest challenge remains our human capital from a skills and attitude point of view. We need to have the right people in the right positions doing the jobs that they are supposed to do. Then you will be able to implement the rules, regulations and standards of this legislation in particular,” said Muchaonyerwa.

“Those two pieces of legislations – the PFMA and MFMA – together with related national treasury regulations and standards have been driving transformation in the public sector. It certainly has set the framework for a better way of functioning in government and brought about greater efficiencies. However, while there have been improvements we are yet to see widespread increases in competence needed to interpret and implement the detail.”

Muchaonyerwa said that although the legislation also defined oversight mechanisms to ensure greater transparency and accountability, corruption; financial mismanagement; and fruitless and wasteful expenditure continued to pose serious threats to the public purse, service delivery and political stability.

 

Other key findings of the report

  • While nearly three-quarters of finance managers looked to public-private partnerships (PPPs) to drive economic development, globally only 53% of respondents who have used PPPs in the past, reported success.

 

  • Some 75% of African respondents indicated that their country has used PPPs to find sustainable funding for infrastructure investments and 78% of these respondents agreed that these partnerships were successful.

 

  • Many respondents expect social media to ultimately become their primary channel to increase transparency, but only 43% are currently using social media platforms. Respondents believe social channels are effective in bringing greater transparency (73%) and making these allocations more responsive to citizen priorities (53%). 75% use websites to increase transparency, which while a high number, is still low given the age of this channel.

 

  • In 2013, 76% said the global financial crisis continued to have an effect on their country’s PFM reform agenda. This year that total dropped to 66%. Meanwhile, the proportion saying the crisis has led to the adoption of new risk management practices has risen to 59%, up from 38% in 2013.

 

  • PFM leaders are also focused on a number of more recent economic problems, such as the Euro crisis and the collapse of commodity prices. Overall, PFM executives need to come to terms, not just with the lessons of one major financial crisis, but with how governments can live with less over the long term. Seventy-one percent agree pressure to develop more efficient and effective PFM practices has led to the reform

 

Better tools needed for success

The report concluded that reform efforts were almost universal but often better tools were needed to achieve reforms and engage the public.

Infrastructure needs were driving increased use of Public Private Partnerships, but managers needed more experience, and often cultural change, to make them a success.

The vital importance of transparency was agreed and understood, but the opportunity to enhance it with modern digital channels had yet to be fully tapped.

To obtain a copy of the complete study, which includes detailed survey results and insight, go to:  www.icgfm.org