Effective Implementation of Public Financial Laws and Its Impacts on Managing Public Funds A Specific Reference to PFM Laws of Liberia (Public fund is the strength of the nation if it is well managed)

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Status: Finished  |  Genre: Editorial and Opinion  |  House: Booksie Classic

Submitted: April 07, 2014

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Submitted: April 07, 2014

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By Mory Duckry A. Sumaworo

LLB, MCL, Ph.D. Candidate in Comparative Laws, Ahamad Ibrahim Kulliyah (School) of Laws, Malaysia

Introduction

First and foremost, public fund is the strength of the nation if it is well managed. Likewise, it may constitute as a cause of public discomfort and financial instability of the state. Therefore, enacting laws, regulations, and rules on public financial management is considered one of the most important steps which nations have adopted in order to have minimal standards of public financial governance. Though, proper implementation and application of PFM Law is one of major challenges that hinder effectiveness and efficiency of PFM Law in developing word.

Besides, Liberia as a post-conflict zone has been experienced misappropriation of public funds for decades. And since social and political stability has been restored, donors and multinational companies have got interest in funding lots of public utilities and capacity building (physical and human infrastructures). Thus, to meet donors’ satisfaction and public needs and wants efficiently, there was a need of a PFM Law formally known as a Public Financial Management Act of 2009. It generally deals with the budget preparation, budget execution, public debt, aid management, accounting report and autonomous agencies and special funds etc.

What is public financial management law?

Prior to any further discussion about the importance of laws related to public finance, it is logically anticipated to have a concept and an overview about PFM law. That will draw up the curtain in order to appreciate effective application of this utmost legal piece of any nation visualizes its socio-economic recovery and aims at achieving financial transparency and accountability at both long and short terms. Hence, PFM law is a legal procedure and process by which public funds are generated and administered in accordance with well –established rules for the public interest. Further, Nwoko, and Anyanwo are of the view that PFM system is a legal and organizational framework for supervising all phases of the budget cycle (budget planning, formulation, execution, monitoring and reporting, internal control, external scrutiny, legislative follow up on audit findings and post – implementation project evaluation)[i]. That means, PFM Law is about the systematization of public incomes and expenditures

Legal framework of public finance law in Liberia

The basses of the financial law in Liberia are found in the Constitution of 1986, as there are several portions of it laying down general foundations how leadership should handle public funds and natural resources of the land. For instance, article 7 reads thus “The Republic shall, consistent with the principles of individual freedom and social justice enshrined in this Constitution, manage the national economy and natural resources of Liberia in such manner as shall ensure the maximum feasible participation of Liberia citizens under conditions of equality as to advance the general welfare of the Liberian people and the economic development of Liberia”. Also, article 58 mandates the president to report to the legislature once a year, while doing so, there should be a report on the economic condition of the Republic and it should cover expenditure as well as income.

Besides, there are every detailed and more specified laws on financial matters of the Republic, such as Public Financial Management Act of 2009, PFM Act comprises twelve parts with 59 sections all deal with financial accountability, transparency and fairness as stated under section 2 (a)(g). Another legal framework of financial oversight in Liberia is Public Financial Regulations for Public Financial Management Act induced by the Ministry of Finance. This regulation details with what is generalized in the PFM Act, and its most visible feature is outlining offenses and sanctions for financial misconducts under Part N of the Regulation. It makes it an offense to receive or give a bribe, falsify a report, conspire to financial fraud or fail to report contravention to the law, among others. It also sects up sanctions for any found guilty of one of these offences as N.6(1) reads thus “Anyone who commits an offence under this part of the regulations is liable on summary conviction to a fine not exceeding ten thousand United States Dollars (US$10,000) or to imprisonment for a term not exceeding five (5) years or to both except as provided in sub-regulation (2).” Finally, there are other relevant laws pertaining to managing public funds such as Consolidated Tax Amendment Act of 2010, Act established Liberia Revenue Authority 2013 and Public Procurement and Concessions Act 2005

Impacts of effective implementation of PFM Laws

It is an established rule that mere blue print of laws does not make them important and effective in social and economic transforms, rather marriage theory and practice makes laws workable. To this end, financial matter in any society is considered as an area where law can easily be breached, however, if standards set by the state are implemented there will be lots of benefits for the entire nation, such as follows:

  1. Equitable distribution of public fund.
  2. Socio-political stability.
  3. Having basic infrastructures.
  4. Encouraging donors to assist national economic recovery.
  5. Enhancing public –private partnership.
  6. Encouraging tax payers to file their taxes.
  7. Providing information for the public how public funds are used as pointed out by professor Sugimoto “Activities of the government are always put into practice with financial outlay, which is paid for by the people. Therefore, the people have a great interest in the way that public outlay is financed”[ii]

In short,  public financial management effectively and efficiently is the key of national development and poverty reduction  as outlined in these words of the CEO of  the International Development Institute for Leadership, Management and Technology (idilmat) Sir, Ronald Quist  “Public Finance Management is about our money, it is about our children’s future, it is about our development. The importance of Public Finance Management and its reform derives as a consequence of its direct role in implementing policy – be it about improving education, achieving better health care, promoting tourism, or increasing agricultural yields. With weak Public Finance Management systems, even where policy makers come up with sound policy, it may not be possible to implement such policy effectively”[iii]

Conclusion and recommendation:

Public financial management law is of importance as it is driving force of economic stability and development of the state in all aspects. Liberian Financial Management Law is considered one of the best in the sub-region as it obvers best international practices. This was emphatically stated by Dr. Williams Atuilik of Governance and Economic Management Support Program of USAID in Liberia. But in order to really appreciate our PFM law there must be trainings and workshops conducted for those public officials responsible for the public funds at the Ministries and agencies. Also, it is advisable to make public financial law a course at law school and business colleges within the Republic so that students can graduate with an insight and expertise about this important piece our law. Finally, the Liberian Institute of Public Administration (LIPA) which currently offers short term courses and diplomat in PFM should enhance these courses to postgraduate levels as the similar institutions in other parts of the world do such asGhana institute of Public Administration (GIPA).

 

 

Endnotes;

 

[i] -Chinedum Nwoko & Kelechi Anyanwu, Public Financial Management in Nigeria , p 10

[ii] Kazuyuki Sugimoto, Public Finance and its Legal Framework: Toward a Legal Framework to Ensure Fiscal Consolidation and Fiscal Policy Management, Policy Research Institute, Ministry of Finance, Japan, Public Policy Review, Vol.8, No.1, June 2012 p. 23

[iii] Ronald Quist, The importance of Public Finance Management to Development, see http://www.developmentcrossing.com/forum/topics/public-finance-management-consulting  accessed on 6/April/2014 

 



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