FINANCIAL MANAGEMENT BETWEEN POLITICAL BALANCES AND MANAGERIAL NEEDS: STATING NEW RULES IN AN ITALIAN REGION

The paper examines the case of Friuli Venezia Giulia, an Italian Region which recently stated new rules for its financial management. The Italian Constitution regulates competencies and powers of Regions. Financial management is autonomously regulated by the local Authorities, with the only constrain of the respect of constitutional principles. Cash accounting is actually used by all Italian Local Governments and line item budgeting is the most common practice: accrual accounting is used in some cases as an additional source of information. In this context, the Friuli Venezia Giulia Region has initiated a process of deep renovation of the financial management. The need for a new law on accounting methods and procedures in the institution arose from two main factors: (a) managerial needs: the new administrators have put big efforts in the introduction of a long term strategic plan for the development of the Region. The new plan was introduced in the light of a SWOT analysis commissioned to a consulting company, but the accounting rules were not adequate to support it. Neither administrators nor citizens had the possibility to control the congruence between the short term line item budget and the new strategies. The lines of the budget simply didn’t fit the strategic plan: important information, like the total amount of resources aimed at financing innovation, was not available. Moreover, efficiency measures and cost control were almost unknown concepts. (b) a diffused awareness that the existing rules were altering the balance between the roles of policy makers and managers: elected officials used to take short term choices on the destination of public funds, trying to satisfy local needs of each ones’ constituency instead of focusing on long term policies for the development of the whole region. The consequences were a fragmented political activity and a bureaucratic approach of managers in their work. The decisional power of managers was in fact very small: their attention was focused more on the lawfulness of choices and procedures instead of on the outcome of policies. This case study represents an opportunity to investigate the relationships between accounting and politics, as well as between budget and strategic plans in Public Administration, and between the role and responsibility of elected officials and managers.