Financial management and governance across levels of government

Financial management across levels of government requires mechanisms and processes of coordination that must reflect the aggregate control needs at the central government level. This is a critical element in ensuring good governance as well as efficiency of activities across government tiers. Furthermore, financial management at the local level of government also has relevant implications for overall fiscal stability that concerns the general government. In this perspective, there is a strong link between government financial management, the macro-economy and public finance. Nevertheless, this link has been largely neglected because the literatures have mostly been developed as separate areas of interest. This chapter seeks to fill this gap by framing governance issues in the perspective of public financial management and by studying how lower levels of government are affected by financial mechanisms for aggregate coordination and control of public budgeting. The key components of financial management and governance across government tiers are identified, with a particular focus on budgetary rules