Book review of public financial management and its emerging architecture.

Author:Willoughby, Katherine G.
Position:Book review
 
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Anyone who picks up the new reader edited by Marco Cangiano, Teresa Curristine, and Michel Lazare looking for "The Way" in terms of structuring and conducting public financial management will be sorely disappointed. This is no "how to" book about how governments can efficiently and effectively manage the flow of funds and/or live within their means. Rather, the tome delivers the hard realities of modern public financial management (PFM). Overarching themes woven throughout include: 1) understanding context in determining any way forward; 2) the lack of any surefire or ideal method to realize "best practices," 3) the predominance of underdeveloped, inadequate and incomplete PFM architecture that exists among governments worldwide; and, 4) advancing PFM has been and remains an incremental, extremely slow process. This book is long overdue. Governments, industrialized and developing alike, have stumbled out of the Great Recession, are looking for ways to climb back to "normal" operations, and seek to avert budgets crumbling when another economic downturn inevitably strikes. At a time when there is some convergence on best practices in public financial management that are touted globally (we know what needs to be done) and technology has the potential to provide incredibly powerful methods for efficient PFM processing (cutting edge tools are available), it is a wonder that governments of all types and sizes are not doing better. The contributing scholars here offer balm to these governments that still have many high hurdles to overcome--their message is, "You are not alone, employ patience, stay focused but be flexible, and, most importantly, manage expectations (of those in and outside of government)."

At the beginning of the book, Allen Schick summarizes a lifetime of study about PFM by reflecting on decades of reforms that have occurred around the world. Immediately, he cautions that no amount of "good management" can account for policy that over obligates governments regarding the provision of life sustenance, public services and programming. He proceeds with a thorough explanation of the instruments of PFM--information, processes and rules--that are necessary to meet objectives of fiscal sustainability, effective allocation and efficient programming and service provision. The art of PFM is balancing these instruments to account for the often unintended consequences of strict adherence to any specific "best practice" or the often kneejerk reaction to past inefficiencies or malfeasance and all within a specific governance structure. Schick emphasizes that such PFM components are instituted to effect behavioral changes that can be and often are obscured by political incentive. That is, many governments are able to provide reliable, valid and timely fiscal data but that does not mean any fiscal rationality is evidenced by relevant policy makers. In terms of making PFM reforms, Schick points out that timing is everything--appropriate sequencing of any considered innovation is vital to success. As relates to fiscal rules, for example, Schick warns that a phased process in which expectations are managed consistently over time will likely yield greater success than comprehensive change engaged rigidly.

The second part of the book considers the design of PFM architecture. Chapters within this section regard the legal frameworks for PFM--the layering of constitutional provisions and laws complicates PFM and usually compromises system success. Fiscal rules may be overly restrictive (automatic...

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