Making Governments Accountable

The Role of Public Accounts Committees and National Audit Offices

Zahirul Hoque, Zahirul Hoque

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317666967
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Public Affairs & Administration
• Index: Politics & International Relations

Over the past two decades, there has been a paradigm shift in public administration and public sector accounting around the world, with increasing emphasis on good governance and accountability processes for government entities. This is all driven both by economic rationalism, and by changing expectations of what governments can and should do. An important aspect of this accountability and governance process is the establishment and effective functioning of a Public Accounts Committee (PAC), a key component of democratic accountability.

With contributions from renowned scholars and practitioners, and using case studies from around the world, this research-based collection examines the rationales for current roles of the PACs and explores the links between PACs and National Audit Offices. It also compares PAC practices from developing and developed countries such as Africa, Asia, Pacific islands, and Europe with both Westminster and non-Westminster models of government.

This will be valuable reading for academics, researchers, and advanced students in public management, public accounting and public sector governance.

Part I Public Accounts Committees and National Audit Offices An introduction

1 Public accountability The role of the Auditor-General in legislative oversight

Zahirul Hoque and Thiru Thiagarajah

DOI: 10.4324/9781315768618-1

Introduction

This chapter reviews the literature available on the contemporary approach adopted by the Supreme Audit Institution (SAI) – also known as the Auditor-General’s Office – in making a valuable contribution to the Public Accounts Committee (PAC) in its legislative oversight function. Public Accounts Committees provide a vital legislative oversight function in scrutinising public expenditure in the Westminster parliamentary system. Although the first public expenditure committees were formally recognised in the nineteenth century, the function of scrutiny dates back to the time of Aristotle, in ancient Greece, before the formation of the first official parliament in Europe. As ancient as it is, the accountability function of the committee has remained consistent with the principles on which Aristotle based the need for a state’s accountability. He emphasised the need to protect public monies from embezzlement and reveal to the citizens the details of financial activity by publicly displaying copies of expenses. The PACs are parliamentary committees set up to scrutinise governments and make them accountable (Friedberg and Hazan, 2012).

The notion of legislative oversight was developed further under the British monarchical system, where approval from the representatives of the upper class was required by a monarch to raise additional tax revenues (Friedberg and Hazan, 2012). In the nineteenth century, the great British philosopher, John Stuart Mill (1861: 104 as cited in Friedberg and Hazan, 2012) contributed to distinguishing the role of the government and the legislative branch by defining the role of the legislative branch as one of overseeing the government:

The proper office of a representative assembly is to watch and control the government: to throw the light of publicity on its acts; to compel a full exposition and justification of all of them which anyone considers questionable; to censure them if found condemnable, and, if the men [sic] who compose the government abuse their trust, or fulfil it in a manner which conflicts with the deliberate sense of the nation, to expel them from office and either expressly or virtually appoint their successors.

This brief history confirms that the notion of accountability for public funds was in existence even before the first PAC was established. Notwithstanding, the emergence of select committees occurred in the nineteenth century. As early as 1840 in Canada, when the provinces of Upper and Lower Canada were united, select committees were appointed to annually investigate the government’s income and expenditure. This later developed into a committee of public accounts and, after that, in 1852–3, into a standing committee on public accounts (Balls, 1963: 21–2 as cited in Jones and Jacobs, 2006).

In the UK, Sir Francis Baring, who chaired the select committee on Public Moneys, made a series of reforms that enabled the establishment of the Select Committee of Public Accounts in 1861 by William Gladstone – who had become Chancellor of the Exchequer in 1859. A Standing Order was issued in 1862 under which the committee would operate:

[T]here shall be a Standing Committee of Public Accounts; for the examination of the Accounts showing the appropriation of sums granted by Parliament to meet the Public Expenditure, to consist of nine members, who shall be nominated at the commencement of every Session, and of whom five shall be a quorum.

(Jones, 1987 as cited in Jones and Jacobs, 2006: 69)

This chapter presents an overview of the significance and the functionality of the PAC and the SAI in making governments accountable. It contributes to the existing literature by critically evaluating the legislative oversight function and how the PAC and the SAI address key challenges in effectively carrying out this function. It is evident from the research carried out that the SAIs have zealously contributed to holding governments accountable, predominantly through enhancing their strategic and operational capability. There is some evidence, however, that also shows that this increased stature of accountability has unintentionally caused an imbalance in access and equity.

The remainder of the chapter is organised in the following manner. The next section discusses the research method used. The third section discusses the different dimensions of oversight. A comparison is made between the Westminster parliamentary system and the US Congressional system, and between potential and effective oversight. In the fourth section, we look at the functionality of the PAC and the relationship between the Auditor-General (AG) and PACs. The fifth section gives an overview of the changing nature of accountability from one of equity, access, service appropriateness and client empowerment to economy and efficiency, fuelled by the introduction of Corporate Governance principles and New Public Management (NPM). The sixth section outlines the four key challenges: the lack of responsiveness of governments; the variability in the quality of audit reporting; the evolving nature of audit content; and the increased institutional complexity of the government faced by the PAC and the AG in addressing the accountability paradigm. We illustrate this point with examples from four Commonwealth nations: Australia, Canada, New Zealand and the UK. The seventh section gives a summary of case studies and argues that the government’s accountability was enhanced by the role of the SAI in providing legislative oversight function and making governments accountable. Finally, we conclude with recommendations to help strengthen the role of the AG as well as suggestions for future research.

Research method

This research was based on archival evidence. The articles researched for this chapter were retrieved using Google Scholar and other online databases, namely EBSCOhost, JSTOR and ProQuest. The keywords used to retrieve the articles were Public Accounts Committee, PAC, Auditor-General (AG), and National Audit Office. After a preliminary search on the background and role of the PAC/AG worldwide, we gathered further evidence to highlight the importance of the legislative function. While researching the current status of PACs, we discovered that the role of the PAC has evolved over time. We then pursued our research to determine the challenges faced by PACs as highlighted by previous research. We continued our research by analysing the content of AGs’ websites to draw inferences on how these challenges were addressed in the four jurisdictions studied. Finally, we draw upon four real case studies to highlight the AGs’ roles before concluding and making recommendations.

Dimensions of parliamentary oversight

There are two primary elements of legislative oversight: the mechanisms of oversight and the effectiveness of oversight. While researching the literature on legislative oversight, an interesting theme emerged in relation to the mechanisms and effectiveness of oversight. Friedberg and Hazan (2012) found in their study comparing the Westminster parliamentary system with the presidential system prevalent in the USA that the separation of powers in the USA presidential regime has ‘strong’ political oversight whereas the parliamentary democracy under the Westminster system exhibits a ‘weak’ administrative oversight. This is due to the fact that parliamentary oversight is influenced by the relationship between the legislative and the executive branches, while, in a presidential democracy, oversight is based on strict separation of powers, which means that the legislature draws its authority directly from the public and is usually independent and strong. Mezey’s (1979) research demonstrates that presidential democracies, based on separation of powers, are able to effectively oversee the executive branch, especially through their committees, whereas parliamentary democracies have limited oversight capabilities, because the government and its leader, who act through a disciplined majority party (or coalition), control the legislature (for details, see Friedberg and Hazan, 2012). Further, Lees (1977) shows that one of the most significant factors that affect legislative oversight is legislators’ motivation (Friedberg and Hazan, 2012). When legislators have a relatively high degree of freedom to act, when their progress is not dependent on party leaders and they are not bound by party discipline, they have greater aspirations to oversee the Executive more effectively. This is more so in the case in a presidential regime with non-cohesive political parties, a system where there is a clear separation of powers, such as in the USA.

Pelizzo and Stapenhurst (2006) further scrutinised the different levels of legislative oversight. They differentiated between ‘oversight potential’ and ‘effective oversight’. ‘Effective oversight’ is when legislatures actually oversee governments’ actions and activities and has an impact on the political system, and, more specifically, on governments’ behaviour. ‘Oversight potential’ is when legislatures have a set of formal powers and instruments to oversee governments’ activities regardless of whether these powers and instruments are actually used. Pelizzo and Stapenhurst (2006) argue that the real test of whether a government is truly democratic depends not only on the ability to perform oversight function, but also the level of scrutiny and control subjected to a government’s actions. The legislative control is implemented through several tools that oversee the actions of the executives, committees’ hearings, hearings in the plenary assembly, the creation of inquiry committees, parliamentary questions, question time, the interpellations and the ombudsman (Maffio, 2002; Pennings, 2000; cited in Pelizzo and Stapenhurst, 2006).

Functionality of the Public Accounts Committee and the State Audit Institution

Public Accounts Committees scrutinise governments’ accounts and make the Executive answerable for their public spending. McGee (2002) showed in his study that, though PACs are considered an effective oversight tool, they have many problems associated with oversight (Pelizzo and Stapenhurst, 2006). First, parliamentarians do not engage in serious oversight of governments’ accounts. Second, scrutinising public accounts provides very little advantage in the re-election of Members of Parliament (MPs). Thirdly, government party MPs (or coalitions) are apprehensive about scrutinising governments’ accounts as they risk being eschewed by their party. As a result, some regimes only have PACs because their presence is considered necessary, but this does not mean that they provide an effective legislative oversight. Pelizzo and Stapenhurst (2006: 17) conclude that ‘Parliaments must have not only the tools but also the political will to oversee the government.’ This applies to the PAC and is a necessary condition for effective oversight of governments’ accounts.

Joachim Wehner’s (2003) research highlights several key challenges inherent to public spending, resulting in the PACs’ need to find innovative responses to safeguard and maximise their contribution to financial scrutiny. He states that the PAC takes on an ex post perspective to public spending where it carries out an assurance process to confirm that the monies have been spent in accordance with the intent, economically, efficiently and effectively. The ex ante process of budget setting and allocations of monies are based on political decisions. This is in stark contrast to the congressional system in the United States, where the appropriation committees fulfil the budget-writing function. Congress demonstrates a powerful role in allocating monies and aggregate spending levels. However, in the congressional system, ex post scrutiny is not as strong as in the Westminster system, where PACs focus on assessing public spending.

The SAI complements the PAC in making governments accountable. Malloy (2004: 165) argues that ‘the best Committees are able to complement and enhance the role of legislative auditors, primarily by providing an important public forum for the further exploration of issues identified by auditors via the Public Accounts Committee’.

Friedberg and Hazan (2012) suggest that strengthenin...