Public Financial Management and Its Emerging Architecture

[Napodano]

New book from the IMF - April 2013.

http://www.imfbookstore.org/ProdDetails.asp?ID=9781475531091

Public Financial Management and Its Emerging Architecture
Author/Editor: M Cangiano, Teresa R Curristine, Michel Lazare

Description
The first two decades of the twenty-first century have witnessed an influx of innovations and reforms in public financial management. The current wave of reforms is markedly different from those in the past, owing to the sheer number of innovations, their widespread adoption, and the sense that they add up to a fundamental change in the way governments manage public money. This book takes stock of the most important innovations that have emerged over the past two decades, including fiscal responsibility legislation, fiscal rules, medium-term budget frameworks, fiscal councils, fiscal risk management techniques, performance budgeting, and accrual reporting and accounting. Not merely a handbook or manual describing practices in the field, the volume instead poses critical questions about innovations; the issues and challenges that have appeared along the way, including those associated with the global economic crisis; and how the ground can be prepared for the next generation of public financial management reforms.

[Napodano]

One of the many interesting parts of this book is the definition of 'PFM levers' which is used to present the PFM innovations of the last decade. Not only PFM objectives and PFM dimensions as traditionally used .

PFM levers are meant to provide incentives for PFM practitioners and possibly (even though there is no assurance for that) to change their behaviors and the outcomes which they are responsible for. PFM levers are:

• Information:  'managing public finances equates to managing information';
• Process: 'which are responsible for converting information into decision, actions and results';
• Rules: 'which constraint political and managerial decision makers and dictate substantive outcomes (prescriptive/proscriptive)'.

 

[Napodano]

Here is an example of a PFM innovation, fiscal risk management, through the lenses of the PFM  levers.

• Information: creation of a fiscal risk database to tabulate fiscal risks before they come true. Explicit/implicit - direct/contingent.
• Process:a parallel budget-type process that assesses the risks before a liability is assumed and limits the total volume of Government guarantees outstanding as well their volume during the fiscal year.
• Rules: establishing an aggregate constraint as part of a fiscal rule, enforced through the MTBF.  It would limit both the volume of contingent liabilities and estimated losses.