Public Financial Management.

Charles K. Coe, (Englewood Cliffs, NJ: Prentice-Hall, 1989), 254 pp.; $31.00 hardbound.

Publishers of state and local government financial management textbooks have long relegated them to the background as "took and techniques," much as publishers did with policy analysis textbooks some ten years ago. Yet, research and teaching in this area have massed to the point where rivalry has developed between three different views of financial management, mirroring some of the basic theoretical differences in public administration proper. Few outside the field of financial management have noticed it. Fewer still have grasped its consequences. My purpose in this review essay is to explore with a more general public administration audience the various forms the study of financial management has taken by looking at the ways textbook writers have catalogued research and presented it to Masters of Public Administration level students.

What is public financial management? Generally, these texts do not explicitly define it. The vagueness of the concept may explain why the larger public administration world has not noticed anything going on. In contrast to the financial management concepts developed in for-profit organizations, vague platitudes, such as ensuring "proper stewardship of public funds" and "the evaluation of the efficiency and effectiveness of operations" (Coe, p. xii), obscure the public sector variant. Although some define financial management as the "efficient raising of resources and wise and accountable use of funds to achieve the highest quality end products possible" (McKinney, p. 2), they fail to give any greater sense of potential accomplishment than bean counting.

However, financial management should appeal to the policy analyst, the general manager, and the career politician. Reed and Swain argue this point when they review the headlines and conclude that "the topic is not obscure or dull" (p. 1). After all, it is a financial manager who will finally settle the savings and loan crisis, decide which health risks the government will insure and at what level, direct the investment of public employee retirement funds for socially beneficial and other uses, and in fact, make financial management the most exciting place to be as a public administrator.

Superficially, the texts portray the field as a set of developing tools and techniques. This placid workshop concept obscures competing, even warring frameworks. These frameworks direct attention to the goals of these tools and techniques; they implicitly ask what financial managers do and, often, how they should do it. Important in examining these frameworks in the texts reviewed here is what questions they answer and which ones they ignore or overlook as a matter of course.

Financial Management Frameworks: Economics, Accounting and Budget Execution

Three views or frameworks have emerged from the textbooks published since 1986, even though what they include varies and their style wanders from normative to descriptive. The first group of texts builds within an applied macro and microeconomics framework (Mikesell, Reed and Swain, Aronson and Schwartz). They take as their focus the choices made by the self-interested bureau chief, department head, budget director, comptroller, financial manager, politician, or citizen. They describe or prescribe the utility maximizing behavior of all of these individuals and groups in relationship to each other.

The second and third textbook groups use a framework from public administration's traditional study of institutions. The finance Office, budget office, comptroller's office, or all three form the focus as the institution worth describing. Those authors view individual choices as mediated by institutional arrangements such as structures, rules, or traditions.

Two major variants of institutionalism emerge in the textbooks reviewed here. At the narrowest is management control, dominated by accounting rules (Berne and Schramm, Steiss, and Garner). Management control systematically integrates all financial activities to achieve accountability to those outside the organization, focuses on the organization and not the individual, and tends to omit interorganization relationships from its analysis.

The broader variant of institutionalism--the third framework--is budget execution (McKinney, Lee and Johnson, and Lynch). Institutional rules and sequential processes in legislatures as well as the executive branch significantly affect individual choices and social behaviors. Broader than management control, budget execution takes into account the interaction between the executive and legislative branches, and includes others integrally involved in budgeting, moving with ease from the individual to the organization.

Consider the textbooks …