Of public accountability

Dr Jamal Khan

CONSIDERABLE concern has rightly been raised in respect of accountability in Bangladesh in academic/research discourses, publications and roundtables/panel discussions and on the media. Surely, there are several types of accountability and several means of achieving accountability. Here, we talk, in the main, about financial accountability. Accountability lies at the heart of a public sector. By accountability we refer to the acceptance of liability by all those who exercise authority to account for the manner in which they have carried out the responsibilities entrusted to them or assumed by them. This liability is owed to the people of a given country by the parliamentary institution, where the principle of representative government is recognised and practiced as well as by the executive institution, including all its ministries, divisions, departments, units, statutory authorities, public enterprises and field agencies. Theoretically, accountability is a fundamental prerequisite for preventing or minimising the abuse of delegated or assumed power. To be effective, a system of accountability must serve to establish clearly-defined goals and objectives against which performance can be analysed, evaluated and measured either in its entirety or in terms of particular programmes or activities and, concomitantly, a system of rewards or incentives and sanctions or disincentives.
An accounting specialist’s functions are far from being a grab-bag of an organisation’s financial responsibilities. They form, in fact, an integral and important part of his daily responsibilities and accountability, which spring from the theoretical conception underlying the public sector financial organisation, principles and procedures. In terms of management theory and accountability practice, it must be reiterated here that proper and continuous attention can never be paid to financial management if finance and management are divorced and finance is kept separate from other factors which continuously enter into policy decisions from the outset. The ministry secretary as a managerial head of a ministry must make sure as a prerequisite for efficient and economical management and that financial standards and criteria are taken into account at all stages by his ministry in framing and reaching policy decisions and in their execution. It is for this reason that it is the general rule and practice that the permanent head of a ministry is the accounting officer, that he must be prepared to answer for the efficient and economical conduct of the ministry as a whole, and that he is the contact point who is in a position to do that as its permanent head.
The ministry secretary/permanent head has ultimate responsibility over a wide field and his overall responsibility – oversight, monitoring, directorial, strategic and accountability – cannot be optimally carried out unless he is supported by a sound organisation – organised and staffed on sound organisation principles and practices, allows for proper and reliable delegation, pays attention to the organisation and staffing of both financial and managerial functions and encourages dialogue between and among these specialists. It is, at the end of the day, the ministry secretary’s responsibility and accountability to see that there is proper and legitimate use of the public funds.
A ministry secretary/accounting officer may disagree with his minister on a matter affecting the ministry’s financial management. The minister may insist on executing a policy decision, while the secretary/accounting officer may regard it as wasteful and extravagant. Of course, in a representative political system, an accounting officer in the last resort needs to accede to any directive given to him by his political head. Yet, operating procedures indicate that it is the secretary’s responsibility to do everything in his power to see that the operation/management of his ministry is carried out with efficiency and economy. He should not hesitate to put his objection to and record his disagreement with any decision, which he regards as indefensible before the public accounts committee. Yet, if the minister adheres to his decision, the secretary must accept it. Alternatively, when the contentious decision entails a secretary’s personal liability on a question of propriety, he should not only set out in writing his objection to the spending and the explanations for his objection but also make the payment on a written directive from his minister overriding the objection. After making such a payment, the accounting officer should inform the ministry of finance of the situation and should send the relevant documents to the auditor-general. If this operating procedure is fully followed, the public accounts committee tends to acquit him of any personal responsibility for the spending.
Yet, another aspect relating to accountability, transparency and professionalism concern the relationship between the accounting officer and the ministry of finance. The ministry of finance, as it is widely known, advises on technical/functional matters of accounting and on general questions of regularity and propriety. By reason of its central coordinating position, the ministry may often be able to offer advice /counselling in the exercise of that responsibility in its widest aspects. It is, indeed, an essential part of the current theoretical framework of public sector organisations that there should be close contact and cooperation at all levels between operating ministries/agencies and the ministry of finance. A ministry secretary/accounting officer is, hence, encouraged – and should encourage his own staffers – to make use of consultations.
Accountability in the public sector is inherent in a set of financial procedures. Many countries’ financial systems have their base in the consolidated fund. This fund is represented by the exchequer account and the paymaster account that are kept by the government at the central bank. Receipts flow into the consolidated fund. The receipts are of several types. First, it is the varied tax revenue, e.g. income tax, corporation tax, capital gains tax, value-added tax, customs duties, purchase tax, etc. Second, it is the revenue from land, revenue from forest products, fisheries, livestock, mineral resources, etc., revenue from agro-industrial outputs, property rental income, etc. Third, it is the money raised by the formation of debt, i.e. loans. While tax revenue and sale revenue represent budget revenue, loan may be of varying types. The loan takes the form of short-term loans, i.e. treasury bills and advances which represent temporary borrowing to meet the initial gap between the collection of revenue and the incurring of spending, and long-term loan, i.e. debentures, savings bond, etc. Loans may be local or foreign.
Payments come next to receipts. Issues from the consolidated fund fall under several rubrics. First, it is the recurrent charges. The charges represent spending incurred under the authority of the appropriations account, i.e. salaries, wages, benefits, incidentals, etc. The second is the constitutional provisions, which are classified as charges on the consolidated fund, i.e. salaries, benefits and allowances of the constitutional position-holders. The third is loans to statutory authorities and public enterprises for capital needs and operational costs.
One of the first contact points in the public sector accounting process is the ministry secretary, who by convention and tradition is named the accounting officer under a legislative mandate and is personally responsible for the accuracy of the appropriations committee and for the proper conduct of a ministry’s financial operations. This is where the doctrine of personal accountability stands in financial management which means in theory that an accounting specialist is personally liable for deficiency in spending operations and financial management. Thus, it is the ministry secretary – and not the cabinet minister – who authorises the actual disbursement of funds. By virtue of being the accounting officer, the ministry secretary traditionally has been made accountable to parliamentary committees, especially the public accounts committee. Each ministry has at the head of its management an accounting officer – usually the ministry secretary – who is responsible to the parliament through the treasury department and to the public accounts committee to which he is answerable directly for omissions or lapses relating to the financial transactions for which he is responsible as well as accountable. He looks after the vote in the estimates as assigned to him by parliament and acts as the receiver of revenue. Ordinarily, legislation, general regulations and departmental directives establish the functions of an accounting officer. He has to ensure that public funds entrusted to him are safeguarded properly; ensure that such functions are applied only to the purposes intended by parliament; ensure that appropriate authority exists for all spending not customarily covered; avoid spending in excess of annual authorisations; account for formal regularity and propriety of financial transactions; and ensure that adequate operational measures exist for the collection and custody of receivables.
The responsibilities and accountability of an accounting specialist are important and regulations stress his personal responsibility for the proper conduct of financial operation. For instance, accountability is explicit and implicit in many functional areas: public funds need to be protected; effective checks of cash balances must be made; the funds are only meant for the special purposes intended by parliament; any payments made need to be within the ambit of the vote and covered by specific statutory authority where necessary; approval has to be obtained in relation to a service not covered when the estimates were prepared; the ministry of finance’s specific sanction has to be obtained by operating ministries for any spending not covered; spending must not be in excess of what has been authorised by parliament; no incurring of spending without the finance ministry’s prior sanction in excess of the specified amount; answerability to the public accounts committee for the regularity and propriety of all spending; existence of adequate structure for collecting and accounting of all receipts; consulting the ministry of finance and the treasury department personnel if any question is raised concerning the propriety of a particular payment; presence of personal responsibility for any accountability issue; the regularity of spending includes the preparation and avoidance of misappropriation; and disallowing spending if dereliction is suspected.
Institutionalised accountability, effective control in public finance, efficiency and economy in public spending rest on the preparation of the annual estimates of revenue and spending. Theoretically, the parliament has the right, responsibility and opportunity to critique and amend the estimate document. So large, bulky and intricate is the document and so wide and varied is the special and technical knowledge needed for an understanding of their specifics and minutiae that the changes made in the parliament are usually slight. Small lapses and inaccuracies are usually overlooked. Large issues and major questions are debated by the parliamentarians, drawing attention of the people, media, professional groups and interest groups. After calculating total spending required for the operation and maintenance of the public sector, it is essential to check what increase it will need to meet this spending. For the plan, i.e. the budget to raise revenue to meet the estimated spending, the ministry of finance is responsible as well as accountable. The ministry of finance is statutorily required to submit to the parliament the estimates of revenue and spending within a specified timeframe. The minister demonstrates his accountability when he presents the budget speech annually before the entire country. The annual estimates contain the public sector proposals and action plans for the anticipated revenue and spending of the country and take account of cash needs.
The operating procedures for the preparation of the estimates entail the issue of a circular by the ministry of finance to operating ministries calling for estimates for the relevant financial year. Accountability on the part of the reporting agencies lies in preparing and submitting information in a timely fashion to the host agency. Established guidelines are indicated in a circular concerning the preparation of the estimates. Two cautions are issued here, viz. the state of public revenue demands economy and the previous years’ estimates should not be the sole basis of current estimates. The cautions underwrite organisational and inter-organisational accountability. The main basis of control and accountability is the authority of the minister of finance. The minister of finance collects the information from the respective ministries and presents those to his cabinet colleagues before submission of his budget to parliament. At this stage, there is the constitutional provision that without the recommendation or the consent of the cabinet – and here accountability has been congealed and collectivised in the cabinet’s collective responsibility involving the entire unit of a country’s highest level policy-makers – the parliament cannot proceed with some provision, amend any provision for imposing or increasing any tax, any change on the revenues or other funds, or for altering any such change. The parliament further exercises accountability when its committee/subcommittee meets to discuss, debate and approve the annual estimates.
Involving another level of accountability is the treasury control which starts before spending begins by prior consideration of the estimates and prior consideration of services requiring financial authorisation and subsequent approval of the estimates. The treasury department represents an entity, which is vested with the management of the consolidated fund and the supervision, control and direction of all matters relating to a government’s financial functions.
Each ministry’s accounting unit is responsible for the receipt, custody and control of funds, making payments and collecting receivables. Revenue receivers are required to prepare and transmit to the auditor-general statements of their receipts and disbursements in an established form. Accounting officers and revenue receivers are appointed by the minister of finance.
A ministry’s accounting unit is responsible – as well as accountable – for maintaining an adequate system of accounts. The adequacy of accounting standards is determined by the treasury department. The parliament must be satisfied through the public accounts committee. The financial transactions of a given ministry need to be in accordance with the parliamentary provision and practices as set out in a country’s parliament and the established practices of the estimates of revenue and spending. All financial transactions must be properly recorded in accounting documents.
The transactions are finally reflected in appropriation accounts. Public sector accounts are divided into two main groups: appropriation accounts and statutory-authority accounts. Appropriation accounts are prepared for ministries by accounting personnel in keeping with established legislative guidelines and provisions. The accounts are to be submitted within a stipulated timeframe in each fiscal year to the auditor-general for examination and report to parliament. Secondly, statutory-authority accounts are meant to serve the financial and accounting needs of statutory authorities and public enterprises. The accounts assume the form of financial statements, i.e. income and spending accounts, statements of reports and payments, and balance sheets. Again, the stipulated provisions spell out that the statements should be submitted within a stipulated timeframe in each fiscal year. The objective is that the audited statements with the reports of the auditor-general from that deadline onward can be submitted to parliament within a stipulated timeframe in each fiscal year to which they relate in keeping with the established legislative provision.
Perhaps, there is a naïve and uninformed belief that statutory authorities and public enterprises do not use public funds as they generate their own in some instances. But the enterprises were acquired in the first place with public funds and therefore, all returns or losses resulting from the assets must accrue to the shareholders. Further, a number of these enterprises depend on the treasury department for funding and related support. The users of these funds should be allocated in the same way as the public sector managers/personnel and should be subject to the same type of examination, probing and reporting.
The practice of auditing has been institutionalised as a tool of professional financial management, i.e. the verification of the financial position disclosed by the balance sheet, profit and loss account or revenue account. Control and accountability are inherent in the auditing function. Auditing is a skilled, critical and clinical examination by an independent observer, i.e. an audit of books, documents, vouchers, papers and records. From these primary materials, documents are written up to enable an auditor to gauge the factuality and accuracy of numbers and statements. The auditor makes a report of his verification, accuracy and findings to the proper authority. Secondly, the appointment of the auditor-general is customarily provided for under the constitution and this constitutional appointment is intended to ensure his independence as a definite link in the chain of control of public funds. The accountability and integrity issues appear here. An auditor-general’s powers and functions are set out and the independence of his office is enshrined in the constitution.
The auditor-general’s powers are extensive, viz. he is empowered to call on ministry/agency personnel for explanations and information which he may require in order to carry out his work; he authorises personnel to conduct inquiry, examination and audit; he has access to books, accounts, vouchers or papers under the control of any employee relating to public accounts and can retain such documents as long as he wants; he requires ministries to provide to him periodically or regularly with accounts of the transactions of such organisations in keeping with his specification; and he can make a search and take extract from any book, document or record in any public workplace without payment of any fee. The auditor-general’s principal function is to report to parliament on appropriation accounts and statutory-authority accounts by a certain deadline in each fiscal year. On behalf of the parliament, his ancillary functions include the examination, probing and the accounts of all accounting personnel, revenue receivers and certain specialised personnel. All these employees — entrusted with the assessment, collection, receipt, custody, issue, payment, sale, transfer or delivery of public funds, stamps, securities, stores or other public sector property – are answerable to the auditor-general.
As part of this general control and accountability, the auditor-general is specifically encouraged to bring to the notice of the public accounts committee any case of apparent waste, fraud, loss, irregularity, malfeasance and extravagance. It is a committee of parliament charged with the responsibility – and accountability – of investigating matters raised in the reports of the auditor-general. The committee expects, as a general procedural matter, the accounting personnel to satisfy the committee members that the policy and the process approved by parliament have been carried out economically, effectively and efficiently. If necessary, the accounting personnel need to provide the committee members with proper explanation of any deviation from this standard operating procedure.
The independence, integrity, objectivity and impartiality of the auditing process, auditors and the auditor-general – one of the critical planks of the accountability issue – must not be sacrificed in the interest of any pressure group here in Bangladesh as well as elsewhere. The auditing function is engaged by stakeholders to conduct an examination and report on the stewardship of organisation management. The auditor-general who is, in fact, the watchdog of public funds and who is required to report to parliament on the stewardship of manager/personnel, must, therefore, retain the responsibility for the audit examination of all public sector organisations. The protection offered to the auditor-general under the constitution makes him, in fact, the most independent, objective and impartial of auditors as his compensations and reappointment are not related to the reports he gives, even if they are critical of management. Given varied challenges and constraints and the lateness of the audited accounts, the auditor-general should be given more control over the human, physical and financial resources he needs to effectively, efficiently and economically fulfil his accountability. A related point is that each country and its management system must be wary of sacrificing basic, functional, theoretically-sound, practically-stable and time-tested principles at the altar of powerful and pervasive special interests. Since the office of the auditor-general is the watchdog of public finance, nothing must be done to devalue its image, credibility and accountability. On the contrary, everything should be done to ensure that the functions of the office are carried out as contemplated by the constitution.
Generally, the auditor-general is of the view that the accounts of all statutory authorities and public enterprises should fall under the purview of the auditor-general and the most prudent way for this to be done is the provision of adequately-trained and professionally-oriented accounting personnel within the office of the auditor-general so that in the long run, sufficient expertise could be built up within the public sector audit service rather than a dependence on external private sector resources. The preferred modality seems to be for the office to be able to recruit, motivate and retain personnel of the right merit and disposition to undertake the audits. There is a further need to ensure that audit resources are deployed to the best effect not only from the office’s standpoint but also to develop the careers of employees. Noteworthy it is that the trend today worldwide is to professionalise and bring the audit of all public sector organisations, including the public enterprises, within the ambit of the office of the auditor-general.
In countries after countries burdened with underdevelopment, the public accounts committee receives adverse reports from the auditor-general concerning public sector accounting and performance. The snags stem from the unavailability of diaries and schedules, defective contract-awarding, circumventing public tendering regulations, mismanaging contracts, high failure to reconcile accounts by operating ministries, and cases of fraud, losses and other irregularities. Diaries and schedules are vital financial records which are essential to verify the spending on travelling. But many personnel fail to produce such evidence of spending to auditors for the purpose of verification. The committee takes the view that diaries are issued to individual employees for official purposes and there should be no question of diaries being withheld from audit inspection. The committee is concerned about the prevalence with which operating ministries tend to circumvent the tender regulations by splitting contracts into smaller subcontracts in order to bring such contracts within the jurisdiction of a lower-level authority. Far too often, special interests inside the public sector commit breaches in regulations on the ground of speed and confidentiality. The committee condemns malpractices of this kind which are too rampant and, in certain cases, appear to border on corruption. The tendering regulations and practices need to be observed without any form of compromise. Error, dysfunction and corruption tend to occur at the highest level and concealing or condoning such breaches strikes at the root of parliamentary oversight on public spending and incites repeat offence. Disciplinary action against offenders is almost nonexistent; financial regulations are not always adhered to; the accommodation of unresolved and unsettled fraud cases continues to be a slur on the quality and reliability of public accounting; and many such deficiencies, concerns and dissatisfactions are due to inadequate and inexperienced young staffers as well as frequent personnel changes. The committee urges that the higher-level personnel at all levels in the public sector must supervise, train, guide and nurture younger employees and provide honest and factual reports on the performance of the personnel.
Latterly, comprehensive auditing has come on board, which provides an assessment of financial, human, physical, managerial and informational resources with due regard to economy, efficiency and effectiveness. The good news is that accounting relationships are reasonably served with this tool. In this context, economy relates to the conditions under which an organisation acquires financial, human and physical resources. Efficiency is concerned with the relationship between output produced and the resources used to produce those. Effectiveness refers to the extent to which an organisation achieves its goals or objectives. Conceptually, all aspects of an organisation can be audited, e.g. human resource, data processing, financial, marketing, technology, information system audits, and so on. Not all of these audits need to be done at the same time. They could, in fact, be phased over two and three years to four and five years. Over a defined period of time, they could be completed with in-depth human resources and use of technology. Comprehensive auditing shows several features, namely, basic standards/evidence, in dependence/objectivity, comprehensiveness, cyclicity, positivity and multidiscipline. There are several benefits of such an auditing stream. One, with accountability being critical in any system, financial auditing carries with it a large measure of financial accountability. But there is also the need for accountability in the larger management system in the public sector, viz. transparency, responsiveness, reporting and answerability. Two, comprehensive auditing provides an objective assessment of the extent to which an organisation pursues economy, efficiency and effectiveness. Three, it allows for the identification of major deficiencies in management and control practices. Four, it identifies existing system strengths and helps managers/personnel build on those strengths. Through comprehensive auditing, measures could be taken which would help an organisation obtain money value in the future. Some argue that where reasonable management systems do not exist, comprehensive auditing may be wasted, suggesting that a country should first move to develop and implement management systems and only then put in place comprehensive auditing. But one may argue back that management does exist – their deficiencies and lapses notwithstanding. This is the bottom-line: by heightening accountability all over Bangladesh, comprehensive auditing would serve as a catalyst for improved management system and control.
It is suggested, and reiterated elsewhere, that the aim should be to have a strong and focused office of auditor-general adequately staffed, located, resourced and equipped, thereby enriching the representative system through public accountability. In considering staffing, emphasis must be placed on not only quantity but also on quality and on ensuring that the operating procedures are in place for facilitating professional, technical and functional training of personnel. Negligent and tendentious attitudes toward public accountability are widespread in Bangladesh. For instance, the Public Accounts Committee, in general, notes that managerial and remedial action are not promptly taken to correct certain areas of weaknesses and deficiencies in the accounting process as reported by the auditor-general in his reports. It is feared that once personnel are permitted to breach well-established regulations on flimsy excuses, there will be a serious breakdown in the proper maintenance of public accounts, as it is evident in Bangladesh. At its worst, this is a deliberate disregard for parliamentary action and a representative system. Inaction and silence in such vital areas end up flouting accountability, responsibility, responsiveness and civility — the bedrocks of constitutionalism, representativeness and the rule of law — and spreading corruption, dysfunction, wrongdoing and unethical behaviour. In sustaining accountability in Bangladesh, standards and criteria must be held high — principle prevailing over expediency, achievement overpowering ascription, national interest triumphing over special interests, and incentives neutralising disincentives.

Dr Jamal Khan was a professor of public sector management at the University of the West Indies. jamalabedakhan@hotmail.com.

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