Financial Times

Both public sector and private sector leaders will soon need to fix a new set of teeth to Financial Accountability and Good Governance, if the discharge of public financial accountability (PFA) is to survive the challenges of the hard meat served by modern day business and operating environments.

A dentist of repute in good governance, whose voice was heard loud and clear on the need for effective financial accountability in the days gone by, is now the advisor to the Chief Executive and is concurrently the Head of Plan Implementation. Can the citizens then expect higher quality, effective and efficient systems of PFA to be in place soon, of course with a new set of teeth with an ability to bite and make the implementation process effective?

World Bank Country Financial Accountability Assessments are designed to assess the risks to development objectives of a country arising out of any gaps or weaknesses in the management of public resources.

The PFA framework, including financial management, control, audit and legislative scrutiny, has not evolved in line with current needs, states a 2003 World Bank assessment, concluding that this lapse has reduced the effectiveness, resulting in less than adequate assurances that public funds are used with economy and effectiveness.

The assessment reveals that accountability is limited to input control and compliance with administrative rules, and that there is no assurance of resources allocated being spent for the intended purposes nor any assurance as to whether the expenditure represents value for money. The Parliamentary oversight is very weak.

The budget deficits have exceeded targets and additional votes on account are a usual practice. Importantly, post implementation reviews are not a compulsory compliance commitment.

The only attempt in taking the first steps in the direction of Fiscal Responsibility by an Act was duly frustrated by non adherence to those commitments by those in charge at the apex of such control.

In the allocation of public resources high level objectives and resultant economic and social benefits are usually articulated by those in power. However, the actual post implementation level of achievement against these objectives are rarely reviewed and reported as a part of PFA and also to draw lessons for the future.

The story in many private sector enterprises is no better. Those with accountability for good governance, in most instances, treat their board room responsibilities without adequate capability and commitment. Those with oversight responsibilities (shareholders) make a mockery of their responsibilities too, by making general meetings only a place to have their voices heard and an occasion to party.

The auditors of private enterprises hide behind carefully worded audit certificates that allocate responsibility to others and accept only a small share for themselves, that too wrapped in many caveats that provide hefty layers of protection against successful prosecution.

Good governance is only limited in many cases to presentations at workshops, annual reports and advertisements and award ceremonies.

The failed implementation of commitments under the Fiscal Responsibility Act and the ineffectiveness of Public Commissions under the 17th amendment match the recorded failures in implementation of codes of best practice in the private sector.

A new innovative mechanism of control and oversight is thus urgently required in both state and private sectors going forward.

By statute, institutional compliance commitments or by professional dictate a new framework must be introduced without any further delay. Can therefore Audit Committees in private sector entities be made compulsory with a defined scope of accountability for control, compliance and good governance, including assurances to shareholders of value for money assessment reporting along with post implementation reviews on major projects, spends and key management objectives? Can this same principle be enforced in the public sector by establishing a Public Financial Accountability Commission, added to the lists of Commissions under the 17th Amendment? This commission must be required to play a role similar to an Audit Committee with authority over all state institutions. It can use the services of the office of the Auditor General for the discharge of its implementation responsibilities.

The Auditor General must also be empowered to include within his scope of responsibility value for money reviews, management audits and post implementation reviews.

The Commission following an independent review of the Auditor Generals reports and obtaining necessary additional information and explanations must make a report on the efficiency and effectiveness of the use of public resources by those with PFA commitments.

The Commission must recommend action to improve the effectiveness of PFA and any punitive sanctions against those responsible for failure in due discharge of their accountability.

Mr. Dentist, we are watching and waiting for you to lead the surgery to give a new set of teeth to good governance! The new Companies Act and amendments to the constitution may be your opportunity.