Economic and Financial Management

Economic and Financial Management

Finance is one of the most important and limited resources available with government. Its proper use can help target areas of need, bring in efficiency and improve services especially for the poor. For us, helping governments and their agencies use their funds better is one of the tenets of good governance – bringing in efficient systems and accountability in management of this limited public resource.

Our specialized team of professionals work in all aspects of the financial management cycle (shown alongside) helping to reinforce economic and financial management through fiscal discipline and financial integrity. From the financial planning stage to resource allocation, monitoring and analysis, we are there at every step of the way to help governments and agencies ensure that public resources are used effectively and reach the intended beneficiaries.

To see a list of our projects in this practice area, please click here. Some of the areas where we have established expertise and experience are:

Medium Term Expenditure Framework

The Medium Term Expenditure Framework (MTEF) is a recent tool used in almost all sector and budget support models to interpret the state policy in medium term financial terms. Some of the benefits of MTEF which are identified are given in the Box alongside. However, for us, MTEF is much more than a mere framework, or a product – it is as much a ‘process’ where budget realities at the macro and sector level, together with sector strategies, inform and discipline a discussion of strategies, policies and resource allocation in advance of the preparation of detailed budget estimates. This is what hopefully helps to achieve the change in the ‘perspective’ of planning in government departments.

We have developed Sector MTEFs for several states and these have been well appreciated in all forums for the simplicity, pragmatism and insights it provides.

Objectives of MTEF

Improved macroeconomic balance, especially fiscal discipline
Better inter- and intra-sectoral resource allocation
Greater budgetary predictability
More efficient use of public monies
Greater political accountability for public expenditure
Outcomes through more legitimate decision making processes
Greater credibility of budgetary decision making

Public Expenditure Reviews

Public Expenditure Review (PER) is an analysis of the finances in terms of various parameters for determining the basis for future planning and allocation. PER is prepared to assist our clients to review their operations and the use of financial resources. The underlying objective is to identify policies to support fast and equitable growth and improve the effectiveness, quality, and equity in delivery of services to the intended beneficiaries. Some of the areas of incisive analysis in PERS conducted by us are illustrated in the Box alongside.

As part of our technical support provided to the health department of states like West Bengal, Bihar, Orissa, Madhya Pradesh and Andhra Pradesh we have extensive experience in preparing PER which has provided useful basis for better fund allocation in future.

Financial Monitoring

Through regular analysis of finances, stringent monitoring of expenditure is carried out by comparing funds allocated vis-a-vis expenditure incurred. This ensures crucial decision-making regarding future fund allocation and hence better fund utilization. Hence, in order to be most effective, it is not enough that funds are made available, but to ensure that they are used effectively, capacity is built and benefits monitored.

Feasibility studies

We have conducted feasibility studies for development projects including review of state finance, departmental performance and consultation with various stakeholders to assess the likelihood of the programme and the financial involvement for its success. Based on these, we have helped design successful programmes in the development sector.

Public Expenditure Tracking Studies

Public Expenditure Tracking Studies (PETS) are surveys that are intended to provide with information about the level of resources allocated to particular good / service. The purpose of PETS is to determine how much of the originally allocated resources reach the intended beneficiaries at each level and the time taken to reach the levels concerned. PETS tries to assess the leakage of public resources (if any) and thus helps to assess the efficiency of public spending as well as the coverage of services in terms of quality and quantity.

We have carried out several such specialized studies that have helped our clients including government departments, national programmes and donor agencies fix systemic weaknesses ensuring that greater benefits flow to the people.

Budgeting and Accounting systems

Proper maintenance of accounting records is the first step towards efficient financial management. In order to achieve this, we have helped our clients in

Improvement in budgeting practices by linking up annual budgets with felt needs of districts and other stakeholders
Transitioning to Double Entry Accounting System, where feasible
Preparation of Opening Balance Sheet including Guidelines for Valuation
Preparation of Accounting Manuals and Financial Management Practices including necessary regulations for their implementation
Introduction of output and outcome budgeting and integration of budgeting with accounting system
Developing software solutions to allow easier accounting, budgeting and reporting systems
Training on treasury system of accounting, compliance with financial rules
Assisting clients in monitoring fund utilization in terms of Statement of Expenditure, Utilisation Certificates

Technology for Improved Finances

In order to bring in efficiency in monitoring systems, ICT is being deployed for development of software. Such softwares have made monitoring of finances easier by reducing the time spent on data collection and validation.

A financial reporting and planning software (screenshot alongside) thus developed for the health department of West Bengal has enabled the department, to

Link its district and state plans to appropriate planning units and the financial heads;
Asses the comprehensive (on and off budget) resource envelope across sources, programmes and plans;
Regularly monitor its progress with respect to plan amount, release, utilisation and outputs achieved;

PFMA studies

We have conducted several studies on Public Financial Management & Accountability (PFMA) issues most notably a study for the World Bank on PFMA in Urban Local Bodies of India. The report can be accessed here.

Our take on PFMA issues stems from our experience in their design and implementation and understanding of government financial systems and constraints. Perhaps that is why most of these assessments and recommendations are taken on board for implementation by the institution/department concerned.

Procurement Reforms

Procurement is a specialized role in PFMA and understandably a weak one. Although rules for procurement are generally well known in the government system, the concept of Value for Money (VfM) needs to be enhanced. Further, even in this electronic age most of the procurement systems are stuck in a time warp having been designed for manual and direct interaction processes.

We help departments and governments enhance their procurement practices by improving procurement planning, long term capital budgeting, transparency in selection through open tendering, public bid-opening and online reporting of contract award. We have worked on procurement systems for civil works, equipments, drugs as well as consultancy and intangible services. We have also helped in warehouse management and designed newer systems to ensure supplies Just in Time (JIT).

Resource Mobilisation

In order to enhance the financial sustainability of department and in particular local government bodies, we have been responsible for enhancing revenues, enhancing creditworthiness, identifying passive assets, structuring projects and improving systems to enhance resources. We have a Financial Improvement Action Plan (FIAP) model for local bodies which is composed of four areas as shown below:

This framework has been very successful in almost all areas where it has been implemented and has not only led to increased resources, but a more robust base, higher confidence and improved governance.