Public funds are the anchor/ foundation for sustainable UHC financing. Public financial management (PFM) capabilities are critical in ensuring that funds are well-utilized and meet taxpayer’s health needs.
The PFM system is the set of rules and institutions governing all processes related to public funds. It is estimated that ineffective PFM has resulted in annual fiscal losses ranging from US$10m – 100m across governments in Africa. Additionally, government agencies often underutilize allocated funds. Data from sub-Saharan African countries indicate that 10-30% of budgets allocated for health go unspent, for multiple reasons chief amongst them being weak PFM systems. This results in a loss of financial resources for the sector and missed opportunities for improving overall service coverage and financial protection for the population.
Governments in SSA are currently contributing less than 40% of community health spend. With recent declines in donor contributions, the onus on governments is to not only allocate more funding towards UHC, but also to ensure that funds are actually utilized in a way that generates value for money, both at national and sub-national levels.
There are multiple reasons for low utilization of budgetary allocations by government agencies, the most common being inadequate planning. Often, we have found that while government agencies requested for funds for utilization within a specific fiscal year, they may not have been adequately prepared to take on the specified activities. These low absorption rates of funds deny the taxpayer access to important services, yet funds had been allocated. By combining good PFM practices and effective project management, government agencies can successfully execute their budgets and:
- Ensure timely delivery of services, and the quality of services is not compromised
- Ensure a good ‘’burn rate’’ of funds (>75%) hence demonstrating that the mobilized resources are needed
- Ease resource mobilization (domestic and donor) as mobilized funds were utilized and services delivered. There is justification for additional resources
Part of our mandate at Financing Alliance for Health is to provide Public Financial Management (PFM) training to public officials involved in community health financing activities. This training is provided both to officials at the Ministry of Health, and sub-national units responsible for budgeting and management of community health funds, co-facilitated by Ministry of Finance. This training allows these officials to understand the principles of PFM as well as each other’s needs and pain points. Following this training, participants are able to not only utilize allocated funds better, but also advocate for additional funding for their programs, as well. Specifically, participants will:
- Understand the key role of PFM and how it impacts their work in community health or UHC more broadly
- Obtain clarity on the national budget cycle and learn practical steps to engage MOF to receive optimum funding for their programs
- Develop stakeholder maps and advocacy tools for use during engagement with MOF for additional funds
- Develop work plans with activities that need to be undertaken to ensure that a minimum burn rate of 75% is achieved on the community health funds
Lastly, for better health financing outcomes more broadly, WHO recommends that countries undertake PFM reforms that foster:
- Better alignment between the PFM and health financing system through incremental system and process improvements
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- Consolidating and reducing the number of budget line items to allow greater flexibility for expenditure reallocation
- Prioritize program-based budgeting, as opposed to historical input-based allocations
- Standardize basic financial management systems including accounting, reporting, internal controls, internal and external auditing, revenue raising, pooling and purchasing
- Transparency and more informed dialogue between health and finance authorities through Improved information and analysis e.g.,
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- Improved information and analysis can lead to improvements in transparency and accountability, better resource allocation and efficiency in health sector spending
- Facilitates dialogue between the MoH and MoF – i.e. estimates of funding needs based on macroeconomic and fiscal considerations are more credible to the MoF.
- Tools – Fiscal sustainability reporting, demographic projections, integrated investment and operational planning
For more information on Financing Alliance for Health’s PFM curriculum, sign up to a mailing section.