This document discusses good governance in public financial management reform. It defines good governance as processes for making decisions in the best possible way. Good governance includes macroeconomic stability, social equity, and efficient institutions. It also discusses principles of good governance like participation, rule of law, transparency, and equality. Principles of public financial management reform include legitimacy, accountability, and performance. Stakeholders in good public financial governance are government institutions and the Ministry of Finance, Parliament, and civil society. Reforms must be implemented sequentially based on a country's existing capacities.

1. COLLEGE OF LAW, GOVERNMENT AND INTERNATIONAL STUDIESCOLLEGE OF LAW, GOVERNMENT AND INTERNATIONAL STUDIES
GMGF5014GMGF5014
PUBLIC FINANCIAL MANAGEMENTPUBLIC FINANCIAL MANAGEMENT
TitleTitle
GOOD GOVERNANCE IN PUBLIC FINANCIAL MANAGEMENT REFORMGOOD GOVERNANCE IN PUBLIC FINANCIAL MANAGEMENT REFORM
Prepared forPrepared for
DR. BADARIAH HAJI DINDR. BADARIAH HAJI DIN
By: Mohamed Dahir HassanBy: Mohamed Dahir Hassan

2. Good Governance in Public Financial managementGood Governance in Public Financial management
reformreform
Definition: Good governance is about the processesDefinition: Good governance is about the processes
for making and implementing decisions. It’s not aboutfor making and implementing decisions. It’s not about
making ‘correct’ decisions, but about the best possiblemaking ‘correct’ decisions, but about the best possible
process for making those decisionsprocess for making those decisions

3. Cont..Cont..
 Good governance is an essential part of a framework forGood governance is an essential part of a framework for
economic and financial management which also includes:economic and financial management which also includes:
macroeconomic stability; commitment to social andmacroeconomic stability; commitment to social and
economic equity; and the promotion of efficienteconomic equity; and the promotion of efficient
institutions through structural reforms such as tradeinstitutions through structural reforms such as trade
liberalization and domestic deregulation.liberalization and domestic deregulation.
 Poor governance may result from factors such asPoor governance may result from factors such as
incompetence, ignorance, lack of efficient institutions, theincompetence, ignorance, lack of efficient institutions, the
pursuit of economically inefficient ideologies, orpursuit of economically inefficient ideologies, or
misguided economic models.misguided economic models.

4. Good Financial Governance: Approaches andGood Financial Governance: Approaches and
integration of development policyintegration of development policy
Perceptions and definitions of Good Governance differPerceptions and definitions of Good Governance differ
internationally between institutions, although notinternationally between institutions, although not
significantly. There is a broad consensus concerning thesignificantly. There is a broad consensus concerning the
general principles,general principles,
LikeLike
Legitimacy, accountability, the rule of law, performance andLegitimacy, accountability, the rule of law, performance and
development-oriented national government, in particular indevelopment-oriented national government, in particular in
terms of social justice.terms of social justice.

5. Cont..Cont..
 Good Financial Governance puts the principles of GoodGood Financial Governance puts the principles of Good
Governance indefinite terms for the public finance systemGovernance indefinite terms for the public finance system
and its subsystems.and its subsystems.
 Thus, it includes all areas of public financial managementThus, it includes all areas of public financial management
policy formulation as well as administration and control ofpolicy formulation as well as administration and control of
state revenue and expenditure in accordance with thestate revenue and expenditure in accordance with the
principles of Good Governance.principles of Good Governance.

6. Principle of good governancePrinciple of good governance
 ParticipationParticipation - To encourage all citizens to exercise their- To encourage all citizens to exercise their
right to express their opinion in the process of makingright to express their opinion in the process of making
decisions concerning the public interest, both directly anddecisions concerning the public interest, both directly and
indirectly.indirectly.
 Rule of LawRule of Law -To realize law enforcement which is fair and-To realize law enforcement which is fair and
impartial for all, without exception, while honoring basicimpartial for all, without exception, while honoring basic
human rights and observing the values prevalent in thehuman rights and observing the values prevalent in the
society.society.

7. Cont…Cont…
 TransparencyTransparency - To build mutual trust between the- To build mutual trust between the
government and the public through the provision ofgovernment and the public through the provision of
information with guaranteed easy access to accurate andinformation with guaranteed easy access to accurate and
adequate information.adequate information.
 EqualityEquality - To provide equal opportunities for all members of- To provide equal opportunities for all members of
the society to improve their welfarethe society to improve their welfare
 ResponsivenessResponsiveness - To increase the sensitivity of government- To increase the sensitivity of government
administrators to the aspirations of the publicadministrators to the aspirations of the public

8. Principles of public financial management reformsPrinciples of public financial management reforms
 Legitimacy:Legitimacy: refers to the interaction between governmentrefers to the interaction between government
and citizens, Citizens should participate directly orand citizens, Citizens should participate directly or
indirectly.indirectly.
 The principle of legitimacy also involves gender equalityThe principle of legitimacy also involves gender equality
in participation in society’s decision-making processes.in participation in society’s decision-making processes.
 In public financial policy and management, the mostIn public financial policy and management, the most
important interfaces between citizens and state areimportant interfaces between citizens and state are
taxation and the allocation of public resources.taxation and the allocation of public resources.

9. Cont..Cont..
AccountabilityAccountability means, broadly defined, that individuals andmeans, broadly defined, that individuals and
organisations can be held responsible for performance.organisations can be held responsible for performance.
Transparency is only possible if information is available andTransparency is only possible if information is available and
used in public.used in public.
Good Financial Governance, therefore, requires theGood Financial Governance, therefore, requires the
cooperation of various players and control bodies, includingcooperation of various players and control bodies, including
Parliament, civil society and the media, using the availableParliament, civil society and the media, using the available
information to control public financial conduct.information to control public financial conduct.

10. Cont…Cont…
 Rule of lawRule of law requires that all state actions are carried outrequires that all state actions are carried out
within a fair and impartial legal framework.within a fair and impartial legal framework.
 Rule of law in terms of Good Financial GovernanceRule of law in terms of Good Financial Governance
creates predictability and trust in public finance. Allcreates predictability and trust in public finance. All
public financial management activities must be based onpublic financial management activities must be based on
laws that have been passed through democratic processeslaws that have been passed through democratic processes

11. Cont…Cont…
 The performance principleThe performance principle means that the state ismeans that the state is
willing and able to provide public goods and serviceswilling and able to provide public goods and services
that meet citizen’s needs, making the best possible usethat meet citizen’s needs, making the best possible use
of resources, they should be provided effectively andof resources, they should be provided effectively and
efficiently applying the principles of Good Governance.efficiently applying the principles of Good Governance.

12. Cont…Cont…
 According to (Guthrie, 2005). Good FinancialAccording to (Guthrie, 2005). Good Financial
Governance development orientation of the governmentGovernance development orientation of the government
focuses on the mechanisms that are most relevant forfocuses on the mechanisms that are most relevant for
transforming sound public finance into benefits for thetransforming sound public finance into benefits for the
population, in particular, the poor.population, in particular, the poor.

13. Stakeholders in Good Public Financial GovernanceStakeholders in Good Public Financial Governance
All individuals and government units thatAll individuals and government units that
have the function of regulating, organisinghave the function of regulating, organising
and controlling the use of public resourcesand controlling the use of public resources
are involved in the implementation of goodare involved in the implementation of good
financial governance reformsfinancial governance reforms
The main parties involved in this processThe main parties involved in this process
are government institutions, which areare government institutions, which are
responsible for the administration and controlresponsible for the administration and control
of public revenue and expenditure, theof public revenue and expenditure, the
Ministry of Finance being assigned the mainMinistry of Finance being assigned the main
role as the leading administrator of thisrole as the leading administrator of this
procedure.procedure.

14. Cont…Cont…
 ParliamentParliament is responsible for the decision on the legalis responsible for the decision on the legal
framework, and for political decision making andframework, and for political decision making and
control in the budget process.control in the budget process.
 Civil societyCivil society is a central player in the quest to achieveis a central player in the quest to achieve
good financial governance. Direct participation of civilgood financial governance. Direct participation of civil
society in the budget formulation has increased in manysociety in the budget formulation has increased in many
developing countries in recent years.developing countries in recent years.

15. Cont…Cont…
 Reforms must be organised in sequenceReforms must be organised in sequence recognising therecognising the
limited capacity for the implementation of reforms, notlimited capacity for the implementation of reforms, not
everything can be done at once.everything can be done at once.
 Planned reform processes are frequently too ambitious forPlanned reform processes are frequently too ambitious for
the country’s existing capacities. In countries withthe country’s existing capacities. In countries with
sufficient capacities, several reforms can be organised insufficient capacities, several reforms can be organised in
parallel. Reforms should be adopted in sequence whenparallel. Reforms should be adopted in sequence when
countries do not have sufficiently robust capacitiescountries do not have sufficiently robust capacities

16. ConclusionConclusion
 To strengthen public financial management as a toolTo strengthen public financial management as a tool
for good financial governance is the responsive,for good financial governance is the responsive,
prudent, effective, transparent and accountableprudent, effective, transparent and accountable
management of public financial resources andmanagement of public financial resources and
requires robust budget and financial management,requires robust budget and financial management,
audit and oversight institutions that operate within theaudit and oversight institutions that operate within the
rule of law.rule of law.

17. Cont..Cont..
 There is a need to link more closely public expenditure withThere is a need to link more closely public expenditure with
the revenue side of the budget especially taxation. Betterthe revenue side of the budget especially taxation. Better
resource mobilisation can create a culture of governmentresource mobilisation can create a culture of government
accountability to the citizen-taxpayer, diversify and makeaccountability to the citizen-taxpayer, diversify and make
more effective public finance, enable long-term financialmore effective public finance, enable long-term financial
commitments to citizens, and reduce dependence on aid flows.commitments to citizens, and reduce dependence on aid flows.