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Accountability and Governance: Persistent Questions, New Challenges Paul L. Posner George 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 2500 2,000 2000 1,500 1500 1,000 1000 500 500 0 0 1950 1955 1960 1965 1970 1975 1980 Federal Civilian Employees 1985 1990 1995 2000 Total Federal Outlays Note: Executive branch civilian employees excluding postal service. Source: Office of Management and Budget. 2005 Billions of FY 2000 Dollars Thousands of Civilian Employees 2,500 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 Government Spend Direct Services Grants-in-Aid Leases Procurement & Contracts Transfer Payments to Individuals Government Credit & Insurance Revenues Corrective Taxes & Fees Tax Expenditures User Fees & Charges Vouchers Regulate Social & Economic Regulation Permit Trading Information, Training & Advise Non-Government Rebuilding Involves Networking Among Sectors: Government Stakeholders in Louisiana FEDERAL HUD USDA DOC DOD VA SBA DHS EPA TREAS DOI DOE DOT HHS DOJ STATE Louisiana Governor LOCAL 19 affected parishes 22 Executive Departments Boards/ Commissions Councils/ Programs 64 Parish Governments Office of the Federal Coordinator for Gulf Coast Rebuilding Louisiana Recovery Authority Louisiana Speaks Orleans Unified Neighborhood Planning 13 Task Forces/ Recovery teams 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 Internal Managerial Reforms Market based regulatory approaches QuasiGovernmental organizations Contracting for specific Services/ products Traditional Direct Government Tax credits and vouchers Public-Private Partnerships Divestiture Devolution Fully Private 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 leasepurchase 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 PublicPrivate 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?