Balanced scale representing responsible public finance with money and community infrastructure.

Decoding Public Finance: A Citizen's Guide to Responsible Spending

Mira Elwood in Politics & Policy June 2025 • 3 min read.

"Ever wondered where your tax money goes? This guide breaks down responsible public finance, ensuring transparency and accountability."

Public financial management (PFM) is at the heart of how governments function. It's not just about crunching numbers; it's about making strategic decisions on how public resources are collected and spent. While many might think of taxes as the primary focus, PFM encompasses a much broader scope, including how efficiently and effectively these funds are used.

Over time, ideas around responsible PFM have evolved, moving from rigid, top-down approaches to more flexible, inclusive models. The classical model focused on strict adherence to rules and balanced budgets, while the 'New Public Management' (NPM) brought in ideas from the private sector, emphasizing efficiency and performance. Now, the governance model seeks to involve citizens and various stakeholders in financial decision-making.

Today, responsible PFM means balancing public expenditures and revenues, ensuring transparency, and promoting democracy through civic participation. It requires governments to be effective, efficient, and realistic in their financial planning, ultimately fostering trust and accountability.

What Does 'Responsible' Public Finance Really Mean?

Balanced scale representing responsible public finance with money and community infrastructure.

In the past, responsible PFM was often seen as simple efficiency. The goal was to create a bureaucracy that faithfully executed public policies. Professionals were expected to follow legal provisions and expenditure limits to the letter.

However, this approach had limitations. While it valued adherence to rules, it didn't always guarantee that public funds were being used in the most impactful way. The focus was more on process than on outcomes.

Classical Model: Efficient bureaucracy, respect for legal provisions.
New Public Management (NPM): Efficiency, performance indicators, private sector practices.
Governance Model: Collaboration, citizen participation, multi-dimensional networks.

The modern concept of responsible PFM aims for a more holistic approach. It incorporates elements of all three models, emphasizing not only efficiency but also effectiveness, transparency, and citizen involvement. This means that public finance should be managed in a way that is both fiscally sound and responsive to the needs of the community.

The Future of Public Finance: Involving Everyone

Responsible PFM is no longer just a matter for governments; it's a shared responsibility. By promoting transparency, encouraging citizen participation, and demanding accountability, we can all play a role in ensuring that public funds are used wisely and effectively, building a more sustainable and equitable future for all.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1007/978-3-319-31816-5_2470-1, Alternate LINK

Title: Responsible Public Finance Management

Journal: Global Encyclopedia of Public Administration, Public Policy, and Governance

Publisher: Springer International Publishing

Authors: Urszula Kinga Zawadzka-Pak

Published: 2016-01-01

Everything You Need To Know

What exactly is Public Financial Management?

Public Financial Management is how governments handle money. It's about making smart choices on how to collect and spend public resources. It includes taxes but covers much more, like making sure money is used well.

Can you explain the differences between the Classical Model, New Public Management and the Governance Model?

The Classical Model focused on following rules strictly and keeping budgets balanced. New Public Management brought in ideas from businesses, focusing on efficiency and performance. Now, the Governance Model tries to get people and different groups involved in making financial decisions.

What does it mean for Public Financial Management to be 'responsible'?

Responsible Public Financial Management is about balancing how much money comes in and how much goes out. It also means being open about finances and letting citizens participate in decisions. Governments need to plan finances well to build trust and be accountable.

What were the limitations of the Classical Model and New Public Management approaches, and how does the Governance Model address them?

The Classical Model valued following rules, but it didn't always make sure money was used effectively. New Public Management focused on efficiency but sometimes missed the bigger picture. The Governance Model aims to fix these issues by involving citizens and considering many different factors. This makes sure that public finance is both smart and meets the needs of the community.

As a citizen, how can I contribute to ensuring responsible Public Financial Management?

Citizens can promote responsible Public Financial Management by pushing for openness, getting involved in financial decisions, and demanding accountability. This helps ensure that public funds are used wisely, leading to a more sustainable and fair future. Also, demanding accountability involves asking the government tough questions about budget execution reports, performance audits and value for money spent.