Financial Management Reforms and the Realities of Politics

There is probably no area of 'governance reform' work that is as technocratic and as ubiquitous as public financial management reform. It is where experts of different kinds - economists, accountants, auditors or all the above - work on improving the plumbing of governments, how revenues are collected and managed with efficiency and a minimum of leakage. Because the technical skills involved are deep and carefully honed over years of specialist training it is also an area where experts often seek to work in a politics- free zone by trying to ignore taking on the realities of each political context and just work on the plumbing. There is no doubt that a lot of good work is going on here, but there is also no doubt that a lot of the work is less effective than it might have been because interventions don't seek to work the politics of the initiative.

That view was reinforced when the other day I attended a seminar on attempts to introduce an institutional risk management policy framework in a specific country; let's call it Bamboo Republic. In Bamboo Republic government finances are notoriously corruptly handled. Yet it has a private sector where large  firms manage the risk of fraud very well, with good internal controls and proper oversight by the boards of directors. Secondly, Bamboo Republic has world class accountants and auditors aplenty. So, the idea was, if the culture of institutional risk management exists in the private sector why can't that be transferred to the public sector? Sounds plausible and worth doing. So, the head of the Treasury in Bamboo Republic was approached and, good reform champion that he is, he agreed to the reforms. Experts went in and introduced all kinds of changes, especially internal audit systems and oversight by the Audit Committee.

You will notice, if you are a logician, that arguing that just because something works in the private sector in a country it should work in the public sector in the same country is potentially fallacious. It is an argument by analogy, the only problem being that there are significant disanalogies between the two sectors. When experts present these reform efforts the language is designed to exclude brute realities. If it is a good seminar, however, reality jumps into the room when the discussants and other participants butt in. And that is what happened in this case. Here, then, are the brute facts about Bamboo Republic that limit the impact of elegant technical reforms:

• the audit committees are not really independent of the heads of ministries; members are his minions;
• there is zero political will for genuine financial accountability at the top of government, yet independent audit committees can only work with the support of the top leaders of government, beginning with the president;
• not only is corruption endemic in Bamboo Republic there is a culture of impunity as well, people get away with massive graft all the time;
• the head of the Treasury is a lone and lonely champion;
• the oversight function properly belongs to the Public Accounts Committee of Parliament, but it is ineffective, packed with government supporters,  and has a backlog of  unexamined audit accounts of government finances going back several years; and
• while at local level there is some public engagement and collective action to insist on accountability with regard to local government finances no such effort exists at the national level.

At some point, under pressure to explain how the situation might be improved some ideas were put forward by the experts, especially collective action, transparency initiatives, strengthening the public accounts committee and so on. I left the seminar confirmed in the view that reforms that ignore ways of working the politics while concentrating on technical elegance should really disappear from governance work...if we care about effective development that is.

Photo credit: Flickr user dolphinsdock