Public Financial Management (PFM) is a system of rules, procedures and practices for government to manage public finances. It encompasses budgeting, accounting, auditing, cash management, management of public debt, revenue generation, and public reporting on public sector financial operations. PFM seeks to address the key challenges of controlling government spending and making agencies operate efficiently and effectively. It drives government policy-makers, managers, and implementers to ask: Is government spending within limits? Is it spending on the right things? Does it obtain best value for money? In the long run, a sound PFM contributes to better delivery of government services to the people.
Performance monitoring, evaluation, information, and reporting are essential components of an effective and efficient performance management system. Crucial to measuring performance is how it leads to results and how these results contribute to a higher order goal. One mode of performance management is through an incentives system where good performance is rewarded.
Similarly, good performance of the public sector leads to effective and efficient delivery of services to the people. This could pertain to frontline services of national and local governments that are regularly accessed by citizens for personal and business concerns.