Public Financial Management and Budgeting
Core concepts
Public financial management (PFM) covers the full budget cycle: formulation, approval, execution, and audit and evaluation. Candidates must know the budget as a legal and policy instrument, the distinction between recurrent and development budgets, medium-term expenditure frameworks, programme and performance budgeting, and the treasury single account. Understand the principles of comprehensiveness, unity, annuality, and transparency, and the roles of the finance ministry, line ministries, and the legislature.
Common traps
A frequent trap is confusing commitment (an obligation to pay) with cash payment, or treating virement (reallocation within a vote) as equivalent to supplementary appropriation, which requires legislative approval. Questions may test whether you know that a balanced budget is not automatically good policy; countercyclical deficits can be appropriate. Another trap is conflating outputs (services delivered) with outcomes (results for citizens). Watch for the difference between the accounting officer's responsibility and the auditor's role.
Worked rule of thumb
Suppose a ministry is allocated 500 million and has spent 400 million by year-end while committing a further 150 million. Cash spending is 80 percent of allocation, but commitments total 550 million, exceeding the allocation by 50 million, which signals a potential overspend requiring control action. Rule of thumb: monitor both cash and commitments, because commitments create future liabilities that cash reports hide.