In Need of Sexing Up: Audit

The art of defenestration.

Sidney J. Mussberger did not want to talk about the Audit.

We’ve said before that some of the most important issues in development are the least romantic and photogenic. One of the issues missing a glass slipper is audit. Let’s be frank for a moment: audits are boring. They are boring to do, boring to read about (except in the rare occasion that they bring to light spectacular mismanagement of funds) and they are boring to talk about, except in their most condensed forms. I have never been the most patient meeting attendee, but two things are guaranteed to have me pining for the release of defenestration: macroeconomic data reconciliation meetings and audit meetings.

Yet, I actively seek out both. Beneath the stolid veneer of number crunching, these are the areas where the Government’s intentions for economic management and the use of public funds are best revealed in their most unforgiving light. After the complaints, arguments and counterarguments that the Lancet article about resource management brought up, this is a timely point to make. The only really legitimate argument that can be made against Governments substituting aid money for their own spending in a sector is if the allocation of funds by Government is grossly inappropriate – otherwise the complaints make a mockery of good budget management and the concept of local ownership of development processes. Yet for all the cry and hue, it’s interesting that no-one has actually looked and examined how many of the countries ‘guilty’ of reallocation have been audited.

If a Government is audited, it should be relatively clear where money has gone. Once this is the case, the whole fungibility argument becomes obsolete: it doesn’t matter what money facilitates bad spending. Bad spending should be minimized regardless. If this is done and reveals no horrorshows, then fungibility of aid is not an issue: all spending is at least justifiable, with no money spent on a new Range Rover for the Minister of Finance’s nephew or a shopping expedition to Paris for the First Lady. The role of donors here is crucial, because it must be played very carefully. A donor that bullies the Government into submitting to an audit by auditors appointed by the donors will face a serious backlash: it is not their Government or money to audit (they can of course audit their own programmes) and they are infringing upon the sovereignty of the state in question. Any canny politician can easily spin this as a case of ‘modern imperialism’ and reject the audit findings, however well-intentioned they were.

Rather, a donor can only advocate for an audit to be initiated by a third party, following legal procedures put into law by the Government. The donor’s role here is to remove all excuses for not holding the audit: to train the supreme audit body, to make sure they have the equipment they need, to provide the legal experts to make sure that the laws governing audit are drafted adequately. This is all fairly obvious and very common. But this is of course only half the story. If the audit is released without any explicatory documents and very little press, its impact outside a small coterie of finance geeks and development agencies will be minimal. The power of audit is to stimulate accountability, and a Government should be accountable to its electorate, those who pay tax to fund it and expect services in return.

This is the insight that lies behind the recent increase in interest in demand-side accountability. Essentially, the idea here is to give civil society groups the ability to scrutinise the myriad information that a Government can produce and to articulate the demands of the electorate better. Again, this is a tricky role for donors to play, because it leaves them open to charges of political partiality. What they must do, therefore, is focus on providing skills to all parties that desire them – and not advice. In Tanzania and Malawi, I have noticed an upswing in this kind of work, and initial signs that NGOs and CSOs are engaging more with budget processes, audit and the like are encouraging. This is probably the one area where I think donors tend not to spend enough time working with non-Government actors. Continue reading