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Financial Management

In many developing countries, annual budgets are not fully executed due in part to a lack of capacity and operational systems to effectively absorb and utilize funds. For example, there can be a lack of expertise in contracting arrangements and grant-making limiting developing countries' ability to program and disburse funds to implementing partners. Cumbersome procurement procedures and poor cash flow management can impact the ability of implementers to get the drugs, medical supplies, and equipment they need to effectively carry out their programs.

Health Systems 20/20 works with health sectors in developing countries to help them solve financial management problems through a combination of instituting better operational systems by improving management skills and institutional arrangements to sustain the improved financial management efforts.

The Health Systems 20/20 approach could involve, for example, any of the following financial management interventions:

  • Developing financial and accounting guidelines and manuals that are periodically updated with changes in procedures to guide health officials and staff in good financial management practices
  • Simplifying complex procedures for approval and release of funds
  • Setting up a computerized accounting program that networks the central ministry of health to its subnational units to allow for timely reporting of financial transactions and effective monitoring of funds utilization.
  • Allowing health workers in remote areas to manage funds via bank accounts, where banking facilities are available, with guidelines on how to spend the funds. This provides a source of cash to address local needs in a timely manner.
  • E-banking solutions for transferring funds from the central ministry of health to subnational units will expedite the funds-transfer process.
  • Establishing procedures for the ministry of health and/or its subnational units to contract with and provide grants for implementing partners, as well as to purchase the drugs, supplies, and equipment needed to provide quality services.
  • Improving financial systems for planning and budgeting through innovative approaches such as Program-Performance Budgeting (PPB). PPB allocates all available financial resources by program, and performance indicators measure the results of actual spending. A PPB approach is implemented as part of broader budget reforms across all sectors in coordination with finance and planning ministries, and could be combined with the Medium-Term Expenditure Framework approach to planning and budgeting.

The development of financial management systems, combined with training and development in better management/supervision and financial management practices for health managers and staff, ensures sustainability of any financial management interventions. Assistance could also be provided to a health institution in establishing a designated financial management unit to sustain any improved financial management efforts.

By adopting the Health Systems 20/20 approach, a developing country's health sector will have the financial management systems and processes in place to more effectively plan and budget for health resources to ensure a smooth flow of funds, effective utilization of financial resources (both public and donor earmarked funds such as the Global Funds for Aids, Tuberculosis and Malaria), and the ability to purchase the drugs and supplies needed for priority health services.