مطالعات تجربی حسابداری مالی (May 2023)
Identifying Challenges to the Public Financial Management System
Abstract
The public financial management system in developing countries faces ongoing challenges. These challenges include ensuring the compatibility of budget planning and discipline with macroeconomics, resource allocation in accordance with poverty reduction strategies, and effectively implementing programs and activities while monitoring results. This research was conducted to identify the challenges of the public financial management system in the country. This qualitative study utilized the content analysis method to analyze data collected between 1400-1401. The required information was collected and analyzed through semi-structured interviews conducted with 15 experts to identify the challenges related to the country's public financial management systems. The challenges related to various public financial management sub-systems including the tax system, treasury system, asset and debt management system, budgeting system, accounting and financial reporting system, audit system, and performance evaluation system were identified in four elements, financial and non-financial resources, management and governance system, institutional framework, and support structures and in twelve dimensions including lack of financial resources, weak infrastructure and equipment, human resource problems, weakness in executive and operational processes, insufficient support of managers, influence and lobbying, lack of accountability, weak rules and standards, lack of transparency, weak training, non-implementation of accrual accounting, and weak performance budgeting. Identifying these challenges can provide a framework for improving the financial management system and help those involved in reforming the public financial management system.IntroductionStrong public financial management can reduce poverty, increase social justice, meet the information needs of stakeholders to assess accountability, and provide the basis for economic and social satisfaction, and contribute to sustainability in different dimensions. To achieve strong public financial management, there is a need to transform the public financial management subsystems.Studies have shown the necessity for reforming public finance management subsystems (Babajani, et al., 2012; Agha Mohammad et al., 2020; Nyamita, et al, 2015). To initiate reforms and strengthen the public financial management system, it is necessary to transition from traditional approaches to new ones that identify existing challenges and obstacles. By resolving them and building capacity, a foundation can be established for reforming the public financial management system. Therefore, the research question at hand is: What are the challenges facing public sector fiscal management?This research aims to introduce the literature related to the subject and explore the less-investigated issues associated with assessing financial management capacity and challenges within its sub-systems. In other words, the objective is to provide a deeper insight for responsible institutions and researchers to evaluate the capacity and challenges of public sector financial management.2-Literature ReviewThe research literature is presented in two parts: challenges related to public financial management sub-systems and assessing public financial management capacity.2-1: Challenges related to government financial management subsystems.Studies have shown that the tax system, treasury system, asset and debt management system, budgeting system, accounting and reporting system, audit system, and performance evaluation system are facing challenges.2-2: Assessing the capacity of public financial managementWhen assessing public financial management systems, the issue of capacity should be considered as crucial. Olander (2007) introduces four interdependent elements that need to be taken into account when assessing and developing public financial management capacity: management, resources, support structures, and the institutional framework. These elements represent the same challenges and limitations that must be identified and strengthened in the evaluation of public financial management. Doing so creates the necessary foundation for reforming and improving public financial management. MethodologyThis research employed a qualitative design. Data was collected through interviews, and the content analysis approach was utilized for analysis. A total of 15 individuals from the public sector were interviewed as part of the research. ResultsThe research results are presented in two parts.4-1) the codes extracted from the interviews are provided in Table.1, which consists of 7 main categories, 12 subcategories (dimensions), and a total of 70 concept elements (challenge factors).4-2) Research Concept Model.Drawing upon the research findings and recognizing that financial management comprises a comprehensive system of subsystems, the challenges associated with these subsystems also reflect the challenges of the overall financial management system. This is illustrated in Figure 1, which identifies 4 elements and 12 dimensions. DiscussionThe challenges related to public financial management subsystems, namely the tax system, the treasury system, the asset and debt management system, the budgeting system, the accounting and financial reporting system, the audit system, and the performance evaluation system can be grouped into four elements: financial and non-financial resources, management and governance system, institutional framework, and support structures. These challenges span across twelve dimensions, including: lack of financial resources, weak infrastructure and equipment, human resource problems, weakness in executive and operational processes, insufficient support of managers, influence and lobbying, lack of accountability, weak rules and standards, lack of transparency, weak training, non-implementation of accrual accounting, and weakness in performance budgeting. Identifying these challenges provides a framework for improving the financial management system and assists those involved in the reform of the public financial management system. ConclusionTo achieve the goals and capitalize on improvement opportunities, the financial management system must address several challenges. These challenges can be overcome through necessary reforms in the public financial management sub-systems, which require cooperation and coordination among executive bodies. The outcome of these reforms and the resolution of challenges will result in a robust public financial management system. This, in turn, will bring about stable financial income, resource discipline and efficiency, increased accountability and transparency, proper management of public funds, and ultimately good governance.However, it is important to acknowledge an important limitation: The breadth of dimensions and sub-systems related to the research subject. Limited access to experts and familiarity with all relevant topics presented a constraint. One potential solution to address the need for skilled human resources in the public sector is the establishment of a public financial management course. By developing the course curriculum in accordance with the actual needs of the public sector, this limitation can be mitigated.
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