Author Topic: Does external scrutiny really make a difference in accountability?  (Read 575 times)

Martin Johnson

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I was recently in Bangladesh doing some PFM evaluation for the primary education sector. I came across a number of interesting things.

One of the things that caught my attention, however, was a comment from the Auditor General department in relation to the Public Accounts Committee. With previous analyses having noted a culture of non-response to audit queries, the current PAC is reported to be ‘unusually active’ in the scrutiny of audit reports and in dealing with the backlog of audit reports from previous years. This appears to be due, in part, to the energy and leadership of the current chair. Staff from the Auditor General office noted that the energy and work effort of the current PAC have had a direct effect on the timeliness and quality of response from the executive to audit observations. I found this example of 'accountability in action' both interesting and very encouraging. Where is the incentive to respond to audit queries if the expectation is that the audit reports will not be read?

Incidentally, I am currently in another country where the situation is very similar - Pakistan - where the PAC has recently been reconstituted and has been going through a long backlog of audit reports going back many years. The realisation that audit observations that have not been properly addressed will be presented before the PAC makes a difference to the quality and operation of the formal process for dealing with audit observations within audited entities - not to mention the realisation among those responsible for managing the public purse that retirement (earthly or otherwise) will no longer come before scrutiny. It appears these 'controlled experiments' would suggest that public scrutiny is very much required to close the accountability loop
« Last Edit: January 13, 2011, 11:24:48 GMT by Napodano »

petagny

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Re: Does external scrutiny really make a difference in accountability?
« Reply #1 on: January 13, 2011, 17:33:40 GMT »
Martin,

I've just been reviewing the 2010 PEFA for Rwanda and you'll be interested to hear that significant progress has been made in this area since your 2007 PEFA.

PI-26 - scope, nature and follow-up of external audit has moved up from D+ to B+ - and PI-28 - legislative scrutiny of external audit reports -  from D+ to B.

A lot of the improvement in PI-28 relates to improvements in the work of the Budget Committee of the Chamber of Deputies, including in-depth hearings and oversight to ensure recommendations are being implemented. Back in 2008 the DFID Fiduciary Risk Assessment assessed the risk attaching to external scrutiny and audit as 'substantial': this would no longer be the case.
« Last Edit: January 13, 2011, 17:35:22 GMT by Napodano »

STONE

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Re: Does external scrutiny really make a difference in accountability?
« Reply #2 on: January 13, 2011, 19:51:01 GMT »
I remember a colleague, John Butcher, RIP, taking a group of Parliamentarians to the House of Commons, Public Accounts Committee (PAC) and then to the UK Treasury and discovering (as I did vicariously) that 90+ per cent of all PAC 'recommendations' were acted on immediately and the most of the rest only with a (reasonable) delay to take account of implementation logistics.

I was browsing through the PFM Blog archives and saw all of Lienert's pieces on role of parliament. In one he points out rightly that the ex ante budget scrutiny role of the House of Commons is a myth, i.e., non-existent, but for me it matter's more that the Parliament  (directly and through its accountability agencies) holds the Government to account for what it said it would do and less for what it says it is going to do.  Over time the former will assure the latter, n'est-ce pas?

On Martin's question yes; I think it does.  But I wish we could  get more from Parliament (in representative democracies) than having to rely on media and civil society organisations.

petagny

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Re: Does external scrutiny really make a difference in accountability?
« Reply #3 on: January 14, 2011, 11:14:24 GMT »
Public accounts committees need to have adequate technical resources to function effectively. We've probably all seen such committees struggling because this element has been missing.

Elsewhere on the PFM Board, Napodano has shared with us his positive experience of working with the parliamentary budget office in Georgia through a UNDP project. This is potentially a fruitful area for donor support, but one that donors might understandably be cautious about getting involved in for fear of being linked too closely to one political faction or another and because it's not helpful to risk having the PAC and its support functions being seen as tools for pushing donor agendas. Maybe, in this instance, UNDP is one of the better placed donor to provide this kind of support.

Martin Johnson

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Re: Does external scrutiny really make a difference in accountability?
« Reply #4 on: January 14, 2011, 12:11:12 GMT »
Thanks to Petagny for bringing my attention to progress in Rwanda PI-28. I am delighted to hear that this is the case.

Following up on Stone's comments, there is an interesting difference between the nature of the information placed before a UK PAC and a PAC in Bangladesh or Pakistan (and perhaps in India too, although I do not have direct experience there). The process in the latter countries involves a series of iterations between Auditor General staff and staff from offices being audited which broadly involves the identification of any rules or procedures that have not been observed, these being brought to the attention of officers in the agency concerned, resolution of some of them (e.g. rectification of administrative errors in accounting / reporting, recoveries of funds ill-spent etc.), a reporting of the same to Auditor General staff, response from the auditor, further resolution of outstanding issues by officers from the agency being audited and so on. What remains after this process of ‘distillation’ is what is reported to the PAC.

Whilst Pakistan in particular, and Bangladesh also, have begun to address systemic issues in the work of their respective Auditor General offices, the process described above reflects the still-prevailing legacy of the control orientation of PFM in both systems. Auditors check transactions and activities associated with them. They check whether the rules have been followed. What the PAC sees are the unresolved instances where rules and procedures have not been followed (serious or otherwise). Hence the importance of recent efforts in Pakistan, for example, of dealing with as many observations as possible at pre PAC stage to ensure that the PAC is asked to scrutinise a manageable volume of observations and, of course, focuses mainly on major issues (with the presumption that less serious issues are likely to be more easily addressed earlier on) and the additional value added in Bangladesh associated with more intense and timely PAC scrutiny causing audit observations to be addressed before being ‘distilled’ into an audit report.

The control orientation, however, means that resolution of audit observations prior to their inclusion in a report placed before the PAC can often mean that the information content of those observations (in terms of what they tell us about systemic weakness) is lost. Thus, in Bangladesh for example, if the audit for a particular ministry produces ‘x’ audit observations (serious or otherwise), all of which are resolved before the time for their inclusion in a report to be placed before a PAC, this effectively means that there is no information placed before the PAC (or otherwise made available more widely in government or to the general public). Hence the absence of audit reports for the Ministry of Primary and Mass Education on the Auditor General website in Bangladesh, for example. Systemic weaknesses are also not being picked up through internal audit, as this is also control-oriented (where ‘internal auditors’ have been appointed), with ‘internal audit’ largely being regarded as the first stage (pre-audit) of a more general internal control process, of which external audit is the second stage (post-audit) – reflected in PEFA ‘D’s for both countries for PI-21.

To bring this back to where we started, public (PAC) scrutiny, manifestly, makes a big difference. Retaining and using the systemic information embedded within control-oriented reporting (pre-audit or post-audit) would make public scrutiny still more effective.
« Last Edit: January 24, 2011, 08:32:18 GMT by Napodano »

atseacliff

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Re: Does external scrutiny really make a difference in accountability?
« Reply #5 on: January 14, 2011, 12:27:52 GMT »
Public accounts committees need to have adequate technical resources to function effectively. We've probably all seen such committees struggling because this element has been missing.

Elsewhere on the PFM Board, Napodano has shared with us his positive experience of working with the parliamentary budget office in Georgia through a UNDP project. This is potentially a fruitful area for donor support, but one that donors might understandably be cautious about getting involved in for fear of being linked too closely to one political faction or another and because it's not helpful to risk having the PAC and its support functions being seen as tools for pushing donor agendas. Maybe, in this instance, UNDP is one of the better placed donor to provide this kind of support.

Cautiousness of donor involvement in parliament is correct but parliament often has to ratify loans and credits so there is also a potential conflict of interest for some donor modalities. I would have thought a peer to peer network (following PEMPAL principals) for the PAC parliamentarians and secretariat staff might be a useful avenue to explore.

 

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