Utilization of Public Funds

Answer: A public fund is money that is generated by the government to provide goods and services to the general public. It is held by the government as a custodian and not an owner. Judicious and effective utilization of public funds is crucial for development as well as for providing essential services in a developing democracy like India. However, it is often seen that these funds are subjected to misutilization, diversions, etc., and there exist several issues regarding their utilization:

• Misuse of public funds for political purposes: Public funds are particularly vulnerable to conflicts of interest, favoritism, bribery, and other forms of unethical behavior and corruption, especially where risk management and control mechanisms are inadequate. For example, recently, there were allegations of misuse of public funds for political advertisements against a few state governments.
• Flow of funds: Ensuring a smooth flow of funds under any scheme is essential for their proper utilization. However, many times, there is little delegation in the system creating bottlenecks in the flow of funds, which impacts the effectiveness of the scheme and utilization of available funds. Also, given the sheer volume and complexity of the job, there is a high probability of a trade-off between doing a job well and doing so within a reasonable period of time by public officials.
• Lack of transparency and accountability: Public funds allotted often lack transparency in the mechanism of their utilization. Their utilization depends on internal administrative guidelines which are generally designed without public consultation. It also leads to lack of accountability.

Various ethical principles that can guide in devising strategies for better utilization of public funds are:

• Transparency: Open and transparent utilization of public funds fosters trust in society that people’s views and interests are respected and that public money is used well.
• Accountability and efficiency: Accountability ensures clarity about the use of public funds and prevents public representatives and officials from indulging in corrupt activities. In this context, e-governance tools should be applied on a larger scale. Further, more awareness about the Right To Information Act, 2005 (RTI Act) among citizens is required. These mechanisms will ensure both efficiency and accountability. Moving towards end-to-end e-procurement and administrative simplification is also a step forward in this regard.
• Adopting effective institutional mechanisms across sectors: These include social audits, expansion of Direct Benefit Transfers, adherence to the Fiscal Responsibility and Budget Management Act, 2003, etc. Further, there should be regular tracking of funds through the Public Financial Management System (PFMS).
• Adhering to regularity and propriety by officials: Regularity refers to being compliant with the relevant legislation while propriety implies meeting high standards of public conduct in the context of the right use of public funds.
• Ethics training as a valuable tool: This will help officials uphold public service ethos and curb tendencies of pursuing personal, private, or political agendas in the utilization of funds.

Efficiency in the utilization of public funds can be further strengthened by mechanisms such as decentralization of utilization of funds, lessening the discretionary powers of public officials, and strengthening the Citizen’s Charter and the RTI Act.