Public Expenditure and Effective Financial Management in Developing Countries, Case Study: Rwanda (2009-2012)

Abstract

The research done which has the topic entitled "Public expenditure and effective financial management, case of Rwanda" from 2009-2012. The study had the purpose of to identify why the effective financial management of public expenditure is not reached for the period of the study.In this research, the following questions are used: Why the audits’ reports continue to show that Government Business Enterprises (GBEs) are the least performing entities? Why there are still many accounting errors in the books of account.As hypothesis of the research, the following intervened in: Some of them have significant weaknesses in financial management and reporting aspects. In some of them, there are no adequate internal control systems or where they exist, they are not effective. In others, there are corporate governance gaps which undermine proper functioning of these entities. Lack of proper understanding of the IFMIS system by most users has made this problem worse. Many entities recorded expenditure on inappropriate budget lines.The sample population consisted of 30 budget officers and 30 public accountants in hole country. This sample has choose randomly because are the first to give an effective information. Also an interview with the head of department in office of auditor general had done.The research was qualitative and quantitative in design. The research instruments included closed-ended questions and open-ended questions. The responses were tabulated based on the effectives and percentages of responses incurred by 43 entities during the 30 June 2010). Public entities (31 institutions) incurred wasteful expenditure amounting to Frw 1,612,460,075 (2010: Frw 1,054,529,243 in 34 institutions) that could have been avoided had they complied with laws, regulations and procedures in force. There are cases where bonuses and other staff benefits like communication, transport and overtime allowances were paid to staff in public entities without appropriate approval.For the fiscal year 2011-2012: Total expenditure of Frw 2,927,029,213 was this year either not supported at all or did not have sufficient support documents when compared to the Frw 10,668,450,282 identified during audits of last year. Further, wasteful expenditure has reduced from Frw 1,612,460,075 in last year’s report to Frw 849,510,992 this year. 68.33% of respondents said that internal control system in Government Business Enterprises (GBEs) exists in average; 23.33% said that the internal control system is good; 6.67% of respondents said that the internal control system very good and 1.67% of respondents said that there is a poor internal control system. 65% respondents said that the financial management and reporting in Government Business Enterprises (GBEs) is average; 26.67% said that the financial management and reporting is good; 3.33% of respondents said that the financial management and reporting is very good and 1.67% of respondents said that there is a poor financial management and reporting. The % of 65 of respondents show that there is a weakness in financial management and reporting in government business enterprises. 75% respondents said that the Corporate Governance in Government Business Enterprises (GBEs) is average; 6.67% said that the Corporate Governance is good; 3.33% of respondents said that the Corporate Governance is very good and 5% of respondents said that there is a poor Corporate Governance. The % of 75 of respondents show that there is Corporate Governance gaps in government business enterprises. 65% respondents said that the understanding of the IFMIS system is good; 23.33% said that the understanding of the IFMIS system is very good; 6.67% of respondents said that the understanding of the IFMIS system financial is average; 3.33% of respondents said that there is a poor understanding of the IFMIS system and 1.67 of respondents said that there is a very poor understanding of the IFMIS system. 83.33% respondents said that the recording expenditure on inappropriate budget lines is average; 5% said that the recording expenditure on inappropriate budget lines is ranked good; 5% of respondents said that Recording expenditure on inappropriate budget lines is poor; 3.33% of respondents said that there is a very poor Recording expenditure on inappropriate budget lines. Data above show that the first and the second hypothesis are confirmed and verified. It is recommended to the Government to pay closer attention to Corporate Governance issues in these institutions and to enhance supervision of the GBEs to facilitate desired improvements. It recommended also to MINECOFIN to enhance the training programmes for users of IFMIS to better their understanding of the system and improve on the quality of accounting records. There is also need to improve the budgeting process to ensure that realistic amounts are allocated to budget lines. The issue of record keeping needs urgent attention to facilitate proper management of public funds to enhance accountability and transparency. Recommended also to all public entities to implement prior year audit recommendations.