Accountability and Governance: Persistent Questions, New

Challenges

Paul L. PosnerGeorge Mason University

November 11, 2007

Consequences of Accountability Weaknesses

• Rampant corruption• Fiscal windfalls to principals and agents• Rent seeking• Undermining rule of law and predictability

necessary for investment• Sustaining and widening disparities• Inhibiting capacity to learn and adapt to

governmental performance shortfalls• Frustrating greater public involvement in

governance

Investment Climate Survey (World Bank 2006)

Bangladesh South Asia All nations

Reg. consistency 78% 52% 47%

Econ/reg certainty 44% 23% 30%

Expectation for gifts

86% 44% 22%

Corruption as major

58% 25% 30%

Confidence in judiciary

17% 48% 57%

Crime, theft as obstacle

39% 15% 20%

Accountability: The Elusive Concept

• The Building Blocks of Accountability – Legal compliance– Financial controls and stewardship– Program efficiency– Program effectiveness

• Evolution of focus

Accountability: Multiple Principals

• Organizational

• Political – voters, parties, elected representatives

• Legal

• Auditors and reviewers

• Professions

Accountability Foundations

• Management capacity• Information on finances and performance• Incentives

– Internalized public responsibility– Sanctions for violating laws– Inducements

• Transparency– Report cards– Freedom of information

Accountability Institutions

• Checks and balances within governments– Executive-legislative relationships

• Independent judiciary

• Party system

• Strong interest groups, NGO’s

• Competitive, free media

• Independent audit institutions

Congressional Oversight Tools and Strategies

• Hearings• Investigations• Support agencies audits/evaluations• Authorizations and reauthorizations• Approval of nominations• Transaction approval/veto• Budget and appropriations• Organization of executive agencies• Executive management reforms• Reports

Roles of the GAO

• A support agency for the Congress– Reports and testimonies addressed to congressional

members and committees– Institutional knowledge

• Oversight of executive agencies– Recommendations to agency heads– Rulings on procurements and spending

• Public reporting promotes transparency and accountability

• Inspectors General

Resources of GAO• Independence of Comptroller General reinforced

by 15 year term• Organized by 14 substantive teams and 11 field

offices• 3200 professional staff in numerous disciplines• Access to data held by executive agencies,

contractors, states• Processes reinforce independence and

neutrality

Accountability Barriers

• Traditions of informal rule and governance arrangements

• Lack of trust and continuous relationships among the key principals

• Weak management capacity• Underdeveloped pluralistic institutions• Absence of professional foundations for rule of

law• Wide disparities in economic resources• Low expectations for public services

Accountability: Reforming Governmental Institutions

• Enhancing the quality of the public service• Improving level of information collected by

government officials• Promoting greater transparency in sharing

information• Fortifying and creating independent institutions

to monitor and check performance• Clarifying goals and rules applying to programs

Accountability: The Shift from Government to Governance

• Establishing healthy NGO’s and free, open media

• Promoting more effective monitoring– Police patrol oversight– Fire alarm oversight

• Expanding the range of providers to decentralize service delivery

• Relying on private partners to provide resources and deliver services

Note: Executive branch civilian employees excluding postal service.

Source: Office of Management and Budget.

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Shift in Public Management

• From program/agency to tools and actors

• From hierarchies to networks

• From public vs. private to partnerships

• From command/control to negotiation

• From management skills to “enablement”

• From internal controls to design

Grants-in-Aid

Transfer Payments to IndividualsSpend

Tax ExpendituresRevenues

Regulate

Perfor

mance

Mgm

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Budge

tingHum

an Capit

al

Financ

ial M

gmtProcurement & Contracts

Vouchers

Social & Economic Regulation

Leases

Permit Trading

User Fees & Charges

Corrective Taxes & Fees

Exec A

genc

ies

Gov’t

Corpo

ratio

ns

For P

rofit

s

GSEs

State &

Loc

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Non-Government

Fore

ign

Government

IT M

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Government Credit & Insurance

Information, Training & Advise

Direct Services

Agenc

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s

Feder

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State/L

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Contra

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Privat

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Rebuilding Involves Networking Among Sectors: Government Stakeholders in

Louisiana

FEDERAL

STATE

HUD SBAVAUSDA DOC DOD DHS

EPA HHSDOTTREAS DOI DOE DOJ

22Executive

Departments

Boards/ Commissions

LouisianaGovernor

Councils/ Programs

Louisiana Recovery Authority

13 Task Forces/Recovery teams

64Parish

Governments LOCAL

19 affected parishes

Orleans

Office of the Federal Coordinator for Gulf Coast Rebuilding

LouisianaSpeaks

UnifiedNeighborhood

Planning

State and Local Fragmentation

Unique Accountability Challenges

• Accountability to multiple constituencies– Multiple actors empowered to bargain

• Third parties enjoy leverage – Political resources– Voluntary participation– Monopolies over beneficiaries– Information asymmetries

• Complex implementation chains

Privatization Pressures

• Supplant monopolies with competition

• Increase financing for public initiatives

• Improve technical capacity

• Promote greater flexibility

Public-Private Roles and Tools

Delivery/

Finance

Public Finance Private Finance

Public Delivery Direct Government

User Fees

Private Delivery Contract Vouchers

PPP’s

Traditional Direct

GovernmentFully

Private

Internal Managerial

Reforms

Quasi-Governmentalorganizations

Contracting for specificServices/products

Market based regulatoryapproaches

Public-PrivatePartnerships

Devolution

Tax creditsand vouchers

Divestiture

Benefits from Outsourcing

• Savings considerable when using competition

• Economies of scale

• Expanded access to expertise and technology

• Improved public sector performance when public service competes with private firms

Public Private Partnerships for Assets

• B = Build• D = Design• F = Finance• L = Lease• M = Maintain• O = Operate• P = Purchase• T = Transfer

• DB – contracts with public for design and construction

• FDBOM – private role in all phases

• BOT – private transfer to public

• PMO – sale from public to private

• LDO – private lease of public facilities

• LO/LPO – public lease/public lease-purchase

Public-Private Partnerships

• Classic PPP – Design, build, operate and maintain over many years

• Different from traditional outsourcing– Long term nature of contract– Private responsibility for multiple phases– Relationship between public and private collaborative,

not arms length– Competition limited due to large up front capital

necessary– Budgetary treatment annualized rather than up front

PPP’s: Rewards and Risks

• Private Sector Brings Capabilities– Financing – Capitalize underutilized assets– Technical expertise– Market efficiencies– Transfer of demand and supply risk to private sector

• Risks from Private Participation– Public values and support– Budgetary control and loss of revenue streams– Contingent Liabilities for shifts in market demand, political

changes, disasters and other contingencies– Oversight and Accountability– Truncated Competition

Requisites for Successful Public-Private Partnerships

• Consistent political support• Effective legal frameworks• Competent government negotiations of terms

and conditions• Competition among potential partners• Performance based contracts• Explicit risk allocations• Guaranteed revenue stream for private firms• Support from broader publics

Privatization Concerns

• Lack of competition reduces rationale for private over public– Exclusivity at outset- sole source– Overdependence over time – indispensable

• Accountability and principal agent issues• Cost shifting and cherry picking• Inherently governmental functions

– Public ensures we get right things done– Private ensures we do them right

• Transparency – assigning credit and blame

New Dimensions for Accountability

• Tool Choice – is contract most appropriate tool for the job?

• Design – are contracts designed to shift risk to private or public sector?

• Nature of network – how can government choose “principled agents”?

• Oversight – can government effectively specify and monitor private performance and resolve problems?