PUBLIC FINANCIAL

MANAGEMENT (PFM)
Presented by: MAL. MUHAMMAD GAMBO MAGAJI
Honourable Commissioner,
Ministry of Finance & Economic Development,
Gombe State.
AT:
The Capacity Building Workshop for Prospective
Permanent Secretaries in Gombe State Civil
Service.
 Objectives of the presentation:
•Have an understanding of what Public
Financial Management (PFM) is all about.
•Introduce participants to the basic concepts
and roles of PFM.
•Understand the importance of PFM and;
•Expose the participants on the Key
Elements of PFM.
 WHAT IS PUBLIC FINANCIAL
MANAGEMENT? (PFM)
Governments are responsible to their citizens and
taxpayers for implementing effective systems of Public
Financial Management and for utilising those systems
to safeguard, and ultimately enhance a country’s
economic sovereignty.

• Public Financial Management (PFM) is defined as the

effective management of public finances for the
development and growth of the economy of the
country or state.
Definition ctd…..

• PFM may also be defined as a set of laws, rules, systems and

processes used by national or sub national governments to mobilize
revenue, allocate public funds, undertake public spending, account for
funds and audit results. PFM encompasses a broader set of functions
than financial management FM and is commonly conceived as a cycle
of six phases beginning with policy design and ending with external
audit and evaluation.
 IMPORTANCE OF PUBLIC
FINANCIAL MANAGEMENT (PFM)
• As populations increase, as resources become more
scarce or as economies grow more complex, managing
public resources has become very necessary and
imperative.
• One reason PFM is so essential is that the tax-paying
citizens of any country expect their public finances to be
well-managed. They expect resources to be allocated
effectively, used to deliver quality services, and to
provide a secure and stable environment in which society
will exist and prosper.
• They also expect revenues to be collected and
expended fairly and according to the law, with
surpluses, deficits and debt levels understood and in
control.

• Additionally, the private and public sectors are highly

inter-dependent and must have confidence in each
other if they are to work together to grow cities and
nations. This kind of confidence requires government
accountability and transparency in financial
management and reporting.
 CONSEQUENCIES OF NOT HAVING PFM
IN PLACE
When Public Financial Management (PFM) confidence
is lost, it can have significant consequences including:
- Foreign investment may become difficult to obtain.
- The cost of public debt may rise and donor funds may
be harder to attract.
- It will bring about reduction in employment and
economic growth, thereby affecting the standard of
living of citizens.
- In the worst case, it can eventually lead to significant
unemployment, raise poverty and may cause social
 THE KEY ELEMENTS OF PUBLIC
FINANCIAL MANAGEMENT (PFM)
There are some key elements necessary to create a
comprehensive and coherent system of PFM. Please
note that these elements do not establish best practice or
be a detailed checklist specifying exactly which
elements should be in place.

They simply aim to stimulate a dialogue that, in turn,

may establish the most appropriate choices for different
circumstances.
These elements include:
1. Climate for Reform
This element of PFM is necessarily the widespread
recognition and acknowledgement that change is
required, along with a commitment from key
stakeholders to effect the necessary reforms.
2. The Legal and Institutional Framework
The second essential element of PFM is that of a well-
defined legal and regulatory framework e.g one that
facilitates the implementation of efficient and effective
public-service arrangements. Appropriate institutions
must be in place, as well as a set of recognised codes,
3. Governance - The Value System
The public entrusts taxpayers’ funds to the government and
expects the funds to be used appropriately. Yet the
appropriate attitudes and behaviours are not always
culturally embedded. Therefore, government should establish
an open, honest and responsible approach to the way services
are planned, executed and reported with a strong intent to
work in the public interest.
4. Capacity and Capability
The fourth key element is to ensure that the appropriate
resources are available to support the application of each
aspect of PFM, particularly in terms of people and systems.
Without the necessary systems and skilled personnel to
At this juncture, let me clearly state that;
The main output of a successful PFM systems is the budget,
through which public policies are financed. A credible budget
is essential, reflecting the expected financial impact of the
government policies and its use of resources.

Next to budget is the Performance Management which is the

effective and efficient implementation of the budget. The
budget must be well managed, monitored and reported to
achieve the anticipated outcomes with three things - value for
money, the efficient and effective delivery of services, and
financial compliance acting as overriding performance
principles.
Reporting: Empirical evidence highlights the positive relationship
between the degree of fiscal transparency and measures of fiscal
sustainability. Government is expected to establish appropriate,
simple and transparent reporting system that clearly shows how
public resources are spent while keeping the citizens informed,
allowing citizens to ask questions and to hold public officials
accountable for their fiscal actions.

Another important output is the Scrutiny and Assurance

Reported information must be reliable for the purpose of
transparency, accountability and decision making. It must also be
capable of withstanding scrutiny from different levels and forms of
review. Confidence will further be enhanced by subjecting this
information to external and independent audit.
Thank You for your
attention

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