Incompetent financial management

The deficiency of government financial management systems may be superficially indicated by sketchy evidence consisting of quite trivial lapses: small breaches of financial regulations, misappropriations, improper use of government assets, missing vouchers etc. A closer acquaintance in some cases reveals additional serious deficiencies such as large-scale diversion of funds, irreconciled and irreconcilable accounting figures over long periods of time, inflated pay rolls, extensive failure to collect revenue and debts, budgets which bear no relation to reality, and important financial decisions taken with little regard for the consequences. Such abuses tend to occur due to major deficiencies in accounting and management information systems such as scarcity of qualified accounting and management personnel; inadequate, unreliable and untimely data bases; ineffective systems of internal control; and inadequate technology and data processing systems.

Limitations in financial management capability affect both the public and private sectors in developing countries. These limitations include shortages of trained staff, inadequate accounting and auditing standards, a lack of policy for developing financial management capability as a part of overall development strategies, and accounting systems that are out-dated and unable to keep pace with the cost and control requirements of development efforts. Failure or inability to account effectively for limited resources has contributed greatly to problems in Africa, for example.