Management of State finances flawed: study

THIRUVANANTHAPURAM March 30. A study on fiscal management in government undertaken by the Public Affairs Forum has concluded that unless urgent steps are taken to improve management of public finances, the Government would be faced with recurring fiscal crises in the coming days.

The study conducted by the Public Affairs Forum (PAF), an organisation dedicated to promotion of public awareness on policy issues, says that the State's annual budget is neither an effective instrument of control nor a means of accountability.

The study has called for urgent steps to make the budget a true reflection of the finances of the Government.

All activities of the Government should be reviewed periodically from the angle of the objectives for which they were designed to ensure that the objectives are met, the study observes.

The study has identified deficiencies in budgeting, lack of cash flow discipline, improper treasury management as some of the main flaws of management of State finances and called for corrective measures like restoration of sanctity of the budget, improvement of management of finances and right-sizing the Government.

The study points out that delay in passage of the Kerala Appropriations Bill results in very little time for implementation of schemes envisaged in the budget.

Such a situation results in agencies created for implementation of projects being unable to perform effectively and, in many cases, remaining without work for long periods and departments being often unable to spend the allotted funds before the close of the financial year.

In order to avoid lapsing of funds, the departments tend to draw the amounts from the treasury and, by various accounting manipulations, show them as having been spent in the given financial year, the study says.

The study has suggested presentation of the budget to the Legislature in January, detailed examination of the budget by the Subject Committees in February, floor discussion in March and adoption of the Appropriation Bill before commencement of the subsequent financial year so that every department gets a clear picture of all the programmes sanctioned.

The report has pointed out that inability of the Finance Department to release funds as stipulated in the project reports is a major cause for time and cost overrun in the implementation of projects. According to the Comptroller and Auditor General of India, the time overrun on 14 projects implemented by the Water Resources Department was 14 to 40 years and cost overrun three to 60 times. Failure to complete projects on time results in delay in the delivery of intended results. This also makes it difficult to prepare long-term plans. This affects both government agencies and private business.

A programme is not an end but only a means to achieve the desired objectives. In the Government, the means are more than the end.

Therefore, very often, a welfare programme may be implemented, but may not actually deliver the desired benefits to the targeted groups.

This is because accountability is for the process and not the product.

An important area requiring important attention is project management.

Preparation of detailed project reports, its evaluation and implementation, if done professionally, would result in enormous savings. Costs are underestimated and potential benefits exaggerated to obtain project sanctions.

The decision-making processes are so complex and involve so many layers of the bureaucracy that it would be difficult accountability when time and cost escalation occur, the study points out.

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