Creating a culture of value for money

Value for Money (VFM) approaches have long been used by the private commercial and industrial sectors over the past few years everywhere in the world. Now the public sector in developing world is also commonly using VFM during expenditure of public money. In exercise of financial powers, the public official must pay due attention to the principles that the expenditure should not prima facie be more than the occasion demands and that every public servant should exercise the same vigilance in respect of expenditures incurred from public exchequer as a person of ordinary prudence, would exercise in respect of expenditure of his own money.

There has been a trend amongst donors to increasingly use VFM concepts to make decisions about foreign aid allocations. A conceptual framework of 4 “E” (Economy, Efficiency, Effectiveness, and Equity) to capture VFM has been using in fund spending of private sectors. ADB and other donor agencies use the term of value for money as the result of a cost–benefit analysis applied to a specific set of risks present in a procurement cycle. These risks are dependent on country context and the procurement objectives. Achieving VFM through the effective, efficient, and economic use of resources requires the evaluation of relevant costs, price and non-price benefits along with an assessment of risks. But the topic of VFM is very unclear to many public officials of developing countries, for which it creates havoc in some situations while spending public money. The exercise of VFM concept is absent not only in the text book, but also absent in the mentorship, training, education curricular and the family culture as well.

It can be exercised at the family level from beginning of anyone’s life. Then they may learn it from their education and training. Teaching a child value for money is an important aspect of parenting. The quality of life we lead, has a lot to do with our understanding of money matters and will dictate how we spend and save money. While teaching child ethics and other principles of religious values, we need to try and instil a firm understanding of financial matters too. It is true that knowing art of expenditure is more important than art of income or earnings.

Buying new clothes and toys for our baby is all fine, but sometimes we need to explore alternative options just to make a child understand that we are cautious about spending habits. We may teach kids the basic principles of reuse and recycle from an early age instead of buying all those new fancy musical toys and expensive clothes. Child needs to learn how to share their toys with friends. In this way, kids will enjoy happiness of sharing. Kids would also learn that shared toys bring the same joys and pleasures of play, as the toys they own. Sharing habits may reduce expenses for things that aren’t an absolute necessity and to look for options to make choices in a more fulfilling and fun way. Kids may follow the same rules for books, novels and other items too. If there are elder siblings in the family, they may share things with his/her younger siblings. Again, free government books distribution to school authority may be a better option than distributing to each student. School may roll out books to new students for the next year. Thus, cost of buying new books for the next year may be saved from the public exchequer because quality of the books is so good it cannot be damaged within one year. Government owned white print, good binding books can easily be used for the next year.

Child needs to be taught to take responsibility for money from a very early age. If they are not used to handle money, they won’t know how to spend money and value it if they are never given the chance to handle money. Children should be taught to maintain an expenditure diary. Keeping a diary of his own expenses will give him a sense of control over his money and help him spend every penny wisely. Children may be inspired for tutoring other kids for making some money. They should be accompanied by parents while shopping to make them understand the way of bargain and calculations to buy things prudently and save money. They may give a sense of choice for better financial planning of a family spending in a particular month. Kids only learn through example, so we need to be cautious on our spending habits. If there is no control over expenditure, child will get no example of controlling expenses. Achieving a sense of value for money at family level may create a culture of savings and sensible expenditure. Value for money must aim to minimize waste and maximize value. They need to learn from their boyhood the effective, efficient, and economic use of resources, so that when they will be grown up and employed in public post, it is believed that they will spend public money more prudently.

Making profit for a company, cost reduction will be a cornerstone to support business. In public sector cost reduction ensures value for money. Basically, Cost reduction strategies are knowing what the costs really are and then looking at how to reduce them. So effective cost analysis must be applied in order to identify and eliminate waste.

Effective public fund spending may secure cost reductions through measures such as process re-engineering to streamline and integrate practice, eliminating unnecessary activities and inefficiencies. Organizational restructuring to minimize staff level and overhead costs and maximize process efficiencies, overcoming duplication of effort, fewer managerial mechanisms are the central efforts of achieving value for money. Again, outsourcing or off-shoring non-core competencies to obtain value at less cost is essentially important to ensure VFM. Organization may choose to dispose unused assets to generate cash for enhancing liquidity, apply ICT, AI and automated technologies to streamline processes and increase productivity and reduce recurring costs. Sometimes, social and public projects and programs need to be redesigned for realizing value for money for the interest of the people and society at large. Public officials and private business must know how to achieve value for money when they spend money through various programs, projects, procurement etc. Public official must know and understand the core value of standard of financial propriety during expenditure of public money. The education, training, societal attitude and an affirmative culture at family may contribute a lot to achieving a sense of value for money for better spending habit of public or private penny.

The writer is a former senior secretary to the government. He can be contacted at s22arefin@gmail.com