FINANCIAL MANAGEMENT

Financial Management



Financial Management

Against the backdrop of heightened realization that economic development and the fight against poverty can effectively be enhanced under an environment of good governance, and that fiscal (inclusive of budget) transparency is one of the key instruments for achieving good governance, a sharp focus is now on fiscal transparency. For poorer countries, donors, international financial institutions and civil society organizations (CSOs) are demanding transparency in the budgeting processes of recipient countries, emphasizing their right to know and, to some extent, determine how public and donated funds are collected and spent. Impassioned calls for fiscal transparency are also increasingly being directed to countries richly endowed with natural resources, encouraging both governments and companies to detail sources of revenues, the exact amounts, how these revenues are spent, and the policies underpinning budget allocations. (Borodzicz 2005)

The growing international focus on transparency is amply demonstrated by the proliferation in recent years of initiatives aimed at directly and indirectly promoting and enforcing transparency practices. These include the United Nations (UN)'s Convention Against Corruption, the International Monetary Fund (IMF)'s Code of Good Practices on Fiscal Transparency, the Organization for Economic Cooperation and Development (OECD)'s Best Practices for Budget Transparency, the Global Reporting Initiative, and the Global Transparency Initiative. Other initiatives are engaged primarily in transparency in extractive industries and include the Extractive Industries Transparency Initiative (EITI), the 'Publish What You Pay' NGO coalition (by Save the Children UK), the George Soros' Open Society Institute, the Global Witness, the Catholic Agency for Overseas Development (CAFOD), the OECD Project on Revenue Transparency in the Democratic Republic of the Congo (DRC) and the IMF Guide on Resource Revenue Transparency. Furthermore, there are also country initiatives and benchmarks such as the UN Economic Commission for Africa's African Governance Project, the Democracy Index of the Institute for Democracy in South Africa and the Worldwide Governance Indicators Dataset of the World Bank. (Altemeyer 2004)

The transparency specificity hinges on ultimate objectives. Thus, on the one hand, objectives aimed at eliminating corruption, money laundering and fighting the financing of terrorism, such as those of the UN, would tend to be stated in broad language incorporating a number of other issues besides transparency, to achieve the ultimate objective. On the other hand, objectives such as those of IMF, OECD and EITI that are aimed at promoting sound financial management and accountability tend to contain narrower and more specific recommendations or prescriptions. The IMF published a Manual on Fiscal Transparency as a guide to implementing the Code. Non-country initiatives tend to be broadly articulated, allowing countries to generate specific initiatives suited to their own individual circumstances in line with these broad initiatives. The long-term survival of a firm seems to be dependent more on the firm's competitiveness. No matter how much physical, human and intellectual resources, an organization is able to mobilize, its long-term survival will be in jeopardy if it fails to stay competitive. The firm therefore needs to be able to determine its level of competitive advantage vis-a-vis that of its ...