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Date: 2019-06-18 Page is: DBtxt001.php L0913-MIforODS-010000

Management Information
Relief and Development

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  • The State of the Relief and Development Sector.
  • Where We Are! How and Why?
  • So Many Things Are Wrong
  • A dialog about the dynamic of how and why many things are wrong
  • Lack of decent accounting.
  • [Box: Delayed accounting is no accounting].
  • Abdication of the accountants.
  • No space for measurement, analysis and review.
  • There's a hole in the bucket.
  • Very little of the funding gets to beneficiaries.
  • Corruption.
  • [Box: Corruption in Nigeria since the 1970s].
  • [Box: Losing trust in Nigeria in 1975].
  • [Box:Making corrupt money in fisheries in Burma].
  • Debt.
  • Debt cancellation, restructuring ... whatever.
  • [Box: An experience in Namibia].
  • Value destruction.
  • Value destroying projects.
  • [Box: Value destruction in South Sudan].
  • Cost and value of workshops and conferences.
  • Cost and value of research and studies.
  • [Box: A study of studies in Lesotho. No oversight.
  • [Box: Internal audit and Oversight].
  • [Box: Oversight and control]. Performance oversight.
  • [Box: Global Fund].
  • Whistle blowers.
  • A system without accountability.
  • [Box: Management Accounting for UNDP].
  • Economic hit men.
  • Foreign direct investment.
  • The value chain and value destruction.
  • Complexity.
TABLE OF CONTENTS SECTION 1 The State of the Relief and Development Sector. Where We Are! How and Why? So Many Things Are Wrong A dialog about the dynamic of how and why many things are wrong Lack of decent accounting. [Box: Delayed accounting is no accounting]. Abdication of the accountants. No space for measurement, analysis and review. There's a hole in the bucket. Very little of the funding gets to beneficiaries. Corruption. [Box: Corruption in Nigeria since the 1970s]. [Box: Losing trust in Nigeria in 1975]. [Box:Making corrupt money in fisheries in Burma]. Debt. Debt cancellation, restructuring ... whatever. [Box: An experience in Namibia]. Value destruction. Value destroying projects. [Box: Value destruction in South Sudan]. Cost and value of workshops and conferences. Cost and value of research and studies. [Box: A study of studies in Lesotho. No oversight. [Box: Internal audit and Oversight]. [Box: Oversight and control]. Performance oversight. [Box: Global Fund]. Whistle blowers. A system without accountability. [Box: Management Accounting for UNDP]. Economic hit men. Foreign direct investment. The value chain and value destruction. Complexity.

How and Why

Lack of decent accounting

Decent accounting is one of the key tools of management, but accounting plays very little role in the management of the relief and development process. Without good accounting, anything goes and that essentially is what has happened.
Delayed accounting is no accounting
I remember trying to get some financial information within the UN system some years ago, and being told that this information would not be available for another 12 months or so. I was given some explanation about the accounting information having to go from the field offices to the specialized agency's head office and then it would come to New York.

As CFO for an international company a few years before, I had imposed a requirement that every operation around the world submitted their complete monthly accounts two business days after the end of the period closing. If our head office did not have the information (sent by telex) at the end of 48 hours, the next day we looked for telephone contact, and a day after that either the company President or myself would be on a plane and arrive in the offending office perhaps 24 hours later.

It took just six months for a company that had had almost no financial controls to accept and embrace the value of analytical financial and operational information. More important, the company's profits improved and staff were highly motivated and quickly made the company's performance as good as anywhere in the industry.

Abdication of the accountants

Whatever happened to the accountancy profession. I would have thought that the accountancy profession would have been vocal about the weak accounting and lack of systems and accountability in the relief and development sector, but it has never happened.

The accountancy profession does most of its work in the private sector being paid to “sign off” on the financial reports prepared by management for the owners. They are paid for this by management. While it has worked most of the time, it has not worked all of the time, and there have been periodic professional scandals. The integrity of financial reporting has been significantly weakened over the past 25 years by the growing importance of consulting done by professional accountancy firms, and the need to keep the client happy and the assignments safe. It is difficult to assess the damage done by conflict of interest before the accounting firms divested their consultancy practices. We will never know.

Accounting in the relief and development sector is terrible. As already notes, the accounting is mainly cash based rather than accrual based, and there is very little of balance sheet analysis and the checks and balances that are integral to best practice corporate accounting. Accounting clerks in UN offices process vouchers and disburse cash, pay salaries, and that's about it. They do not usually do cost accounting related to projects, and certainly do not do project performance analysis as a priority part of their work.

I have made the case that the only complete form of accounting is an accrual based system with balance sheet, operating statement and cash flow, but my efforts have fallen on deaf ears. There are very few professionally qualified accountants in the employ of the relief and development sector, including big government agencies ... and hardly anybody, almost nobody, understands the basic concepts. In the accountancy community it is often said: “Show me weak accounting, and I will show you a weak organization, and weak performance”. Using this concept the relief and development sector has tremendous weakness.

No space for measurement, analysis and review

I spent my professional career doing financial and operations analysis. When I was doing this in the corporate world my work rapidly moved from study to review to decision ... and as a result my work had a tremendous value to the companies where I was working. The study and the review had costs, but the decision step resulted in profit improvement many multiples of the cost of my work.

In the relief and development sector organizational setting it was impossible to get similar results. Decision making had a very different dynamic, with the idea of cost effectiveness almost totally ignored. The use of good “management information” for decision making is almost totally absent, and nobody in the system wants to change.

There’s a hole in the bucket

Where has all the money gone. Over the past 40 years as much as $2 trillion has been disbursed through the relief and development sector, and at the end of this time there is a lot of debt, but rather little development. Many of the problems of development are blamed on lack of money and financial resources, without being specific about there the money flows are being measured. The fact of the matter is that there a large amount of money has gone into the system, but rather little of it has been getting to where it is needed. Some of the fund flow loss is plain corruption and fraud, and some is poor decision making.

Fund flow accounting is not done very well. There is little reporting that makes tracking fund flows easy. Oversight breaks down as funds move from organization to organization. Since in modern government and the relief and development sector funds are commonly disbursed into another organization, and often then disbursed further into other organizations, oversight becomes totally non existent.

I believe that fund flow accounting in the relief and development sector is one of the most obvious places to make substantial improvement (see page nnn)

Very little of the funding gets to beneficiaries

Only a very modest amount of relief and development fund flows reaches communities where ordinary people live and work. Most communities are really “on their own” and rarely see any form of support either from their own government or from NGOs supported by relief and development sector donors. Without community level initiatives there is not going to be much of visible and useful results. Funding flowing into government and into parastatals and other government controlled entities has been almost 100% ineffective as a vehicle to deliver fund flows to community activities.


Bribery and corruption are not new. People have always been “for sale” but the scale of modern bribery and corruption is probably at record levels.

I was introduced to the idea of fraud and bribery and corruption in a book published in the 1930s called “Very Private Business”. This book opened my eyes to the creativity of people when a lot of money is involved. Later, when I had accounting responsibilities in the US corporate arena I remembered lessons from the book, and tried to build accounting and control systems that would make it difficult, if not impossible for the creative crook to run off with the company's assets.

When I found myself consulting in the relief and development sector it was a real shock. Most of the controls are onerous, but totally useless. They serve to stop good people from doing a good job, and are virtually no deterrent to the rich and powerful crooks. It was a shock to find that huge fund flows were not accounted for, but not the subject of any oversight or corrective action of months and years. In my corporate experience I would have wanted action tomorrow, if not already today.

It was also a shock to find how little attention anyone in the relief and development sector was paying to fund flows and their control. Everyone seemed to have fallen into the trap that if the subject was talked about and there was a plan, then that would be good enough. For many things that may be so, but when it is the accounting for and control of money it is totally inadequate.

When good people meet bad systems

Good people need to get paid, they need their salaries. They work hard and would willingly put themselves on the line to get good outcomes in an emergency. These people do get into the news from time to time as they work against all odds to mitigate the impact of disaster. But good people are also stuck with whatever system and culture there is, and can do little to change them. Good people get beaten by bad systems, bad processes, and ineffective organizations. They work in institutions that make it very difficult for them to perform well and get the best possible results. When it comes to day to day work these institutions are huge bureaucracies with all the problems associated with a big and clumsy bureaucracy.
Nigeria since the 1970s
I was working a lot in Nigeria during the 1970s when the first oil crisis increased crude oil from $3.50 a barrel to $13.50 a barrel and made Nigeria very, very wealthy.

I was staying at the Ikoyi Hotel in Lagos and watched the flood of foreigners, mainly Europeans and Americans, who arrived in Nigeria intent on getting profitable contracts no matter what. Most arrived with lots and lots of cash, which they exchanged for contracts for everything under the sun. Most contracts were not worth the paper they were written on, but the Nigerians were happy, and the foreigners were happy until they got home and realized how little they had for their money and effort. These were heady times, and the world's greediest people were on a feeding frenzy.

The business community from the “north” expected to bribe the Nigerians and profit mightily. In fact, quite often, the Nigerians conned their new partners and the greedy lost their investment.

And there was also the close association between the leaders of the Nigerian military, the government and the oil companies and oil industry contractors. It is common knowledge that government and government leaders in Nigeria, with a lot of their friends and associates became fabulously wealthy through all sorts of schemes, and largely at the expense of the national treasury and the Nigerian people. Though the oil companies can probably prove that they did nothing illegal, there are few close to the Nigerian situation that are comfortable with the oil industry's behavior.

The grand corruption practiced in Nigeria has distorted the economy so that the country is almost insolvent while its elite are among the world's wealthiest.

No accountability anywhere. A lot of the country's economic activity is now in the control of the corrupt, and the mass of ordinary Nigerians get left out.
In general I see the problem of corruption as being as much an ethical problem from the side of the payer as the payee. In other words, an oil company executive paying out is as ethically compromised as the government official receiving the bribe.
More from Nigeria in the 1970s
I was in Nigeria and friendly with some of the Central Bank staff in Nigeria at the height of the cement scandal. Hundreds of shiploads of cement were sold to Nigerian businessmen using irrevocable letters of credit. Because of a huge overload situation in the Nigerian ports, there were very long waits to come in to unload. International businessmen know their trade, and most of the ship charters were “time charters” which means that payment for use of the vessel depends on how long it is being used ... and with the port congestion this became a very long time ... months instead of days to get into port. With bribery it was easily possible never to get into the port. The situation was totally out of hand, and a disaster for Nigerian businessmen.

The Central Bank decided that it would solve the problem by revoking “irrevocable” letters of credit, something that was never ever done by serious international financial institutions. I commented at the time that in 5 minutes the Central Bank had done damage to Nigeria's reputation that would take decades to rebuild. More than 30 years later, Nigeria's financial reputation is still a shambles.
It one looks closely, it is fairly easy to figure out the various ways that money or value is removed from the system for private benefit.

But it is much more difficult to do very much about it, especially when the amounts are substantial. In many parts of the world it does not cost very much for someone to be eliminated ... and if some of the recent writing is to be believed, this is not limited to the “south”.
Making corrupt money in fisheries in Burma
The State fishing company, PPFC (Peoples Pearl and Fishing Company) was losing money operating fishing trawlers, which did not make any sense based on the state of the fisheries resource and the characteristics of the fishing vessels. As a former fisheries and seafood company CFO I knew something about the industry and its operations. Something was going on.

As part of the World Bank mission we traveled by boat from Rangoon to the mouth of the Irrawaddy River, the same route used by the PPFC trawlers.

Many hundreds of small motorized fishing vessels were active near the mouth of the river, and it suddenly became clear what was happening. The large trawlers were supplying fuel to these fishing vessels and making a fortune for themselves. The official price for fuel was 3 and the black market price was around 30 ... so a good profit. And bluntly put, private profit is much more valuable than profit from fishing that would accrue to PPFC.

When I started looking more closely at the fuel storage facilities I noted that almost every flange on the pipes were leaking ... not a lot, but something. And under every leak there was a small can collecting the fuel. The official economy of the country was not working, but there was an underlying enterprise economy that was alive and well, albeit illegal.


If there is so little investment ... so little infrastructure ... how come there is so much debt? There are some simple answers:
  1. money has been lent badly by the World Bank and other lenders; and,
  2. the money has been used badly by the borrowers, with the borrowing governments and their crony's the worst.
Back in the 1970s when the international financial system was in turmoil after the oil shocks, Walter Wriston, the CEO of Citibank from that era summed up the financial opportunity saying something along the lines that developing countries “needed the money, paid high interest, and could not go bankrupt” and the international financial community was happy to oblige. Many commercial banks eventually lost some in the eventual restructure and debt forgiveness that subsequently has taken place, but overall they did very, very well. The World Bank participated in the flurry of lending, but in the case of the World Bank did not do much to forgive its debt when the “projects” failed to deliver much “development”.

There were decades of dialog about debt forgiveness and debt restructuring or rescheduling or whatever ... but much less discussion of how and why the debt came into existence in the first place, and specifically who are the responsible people involved.

The leadership of the relief and development sector has never taken any meaningful action to get at the culpability of the various actors and to hold them accountable.

Debt cancellation, restructuring ... whatever

There are many advocates for debt cancellation or some form of radical restructuring. There have been “agreements” about this over and over again, but also conditionality. There has been some debt cancellation, but only after the beneficiary country has jumped through hoops to satisfy the terms and conditions. The way the process works is typical of the relief and development sector, a huge amount of study and reports and meetings and negotiations before any agreement and any useful action.

The media and the advocates for debt reduction have periodic press bonanzas, but for the poor people in poor countries it is all invisible.

The 2005 G8 Summit hosted by Prime Minister Tony Blair highlighted commitments about debt reduction, but for all practical purposes not very much can be seen from the perspective of the poor communities. It gets headlines in the “north” and does practically nothing in the “south”.

The whole debt discussion is a cruel hoax on the world's poor and vulnerable. Without other interventions these people remain poor and vulnerable.
An experience in Namibia
When I was working in Namibia I was at a meeting of with donors Chaired by the Minister of Finance of Namibia. The purpose of the meeting was to move forward the country's strategy for development and how it would be funded. As is the custom in these meetings all the donors had an opportunity to say their piece.

When it came to the turn of the Commonwealth Secretariat, represented as I recall by a Canadian, Namibia was encouraged to gain membership of the Breton Woods organizations (World Bank, IMF et al) so that they could borrow for development.

The Minister asked some pertinent questions including about rates or interest and the currencies of the loans, and was told that the interest rates would be low, and that the currency would be a basket of currencies like the US dollar, the Canadian dollar, the Swiss franc, and so on.

The Minister then asked about project performance from such financing, and specifically what rate of return and what cash flow would be projected. The donor representatives present started to get uncomfortable, and no real answer was provided.

The Minister went on saying more or less the following: “I think you know, our currency is the South African Rand. This is a currency that is being rapidly devalued because of the economic sanctions against South Africa ... which we support ... but it does mean that our currency is devaluing at a rate of more than 20% per annum. If we borrow, we have a real interest cost of 20% plus whatever the low interest that is being charged by the lenders. And up to now, I have not seen any development project that is going to be able to support debt financed development in Namibia”.

This was one of the best summaries of a critical development dilemma. The Minister was absolutely on target with his analysis. Sadly, I am not sure the donor representatives really understood. Most were not as well educated and experienced as the Namibian Minister.

Value destruction

Development ought to be about building value. In fact development expenditure does more of value destruction. In the course of the last three decades as much as $2 trillion has flowed into the relief and development sector, but the results are minimal. What is apparent is that much of what goes on in the relief and development sector ends up being value destruction. Money is consumed, but the results are not achieved. It is actually worse. Additionally the value destruction has created an enormous third world debt. The only thing “for sure” in a World Bank project is that the disbursements will result in debt, nothing is for sure about the benefits that will arise. While it is apparent that a lot of relief and development expenditure ends up being “value destruction” ... there is very little or no analysis of this going in the major relief and development sector organizations

Value destroying projects

The relief and development sector operates largely through projects. Not many of them are value adding, rather they a value destroying. At one point in my career I was retained by UNDP to evaluate (desk review) their project portfolio. I was not asked to repeat the exercise, and my work was probably totally ignored. But the overriding theme was disbursement of money for work that sounded worth doing, but beyond that could not and would not do very much.

The feedback of performance information to the head office showed that money had been spent, and some things had been done, but rarely that anything of substance had been achieved.

It is this lack of substance in things being done that is one of the many issues in the performance of the relief and development sector.
Value Destruction in South Sudan
For years and years UNDP funded a small capacity building project in South Sudan. The project consisted of a single CTA working in an advisory capacity with the local government. The expenditures were a generous UN rate salary together with normal living and transport allowances ... perhaps 50 times what he would have earned in a government job in his home country. The CTA had an office in the government administration building and by all accounts was “on seat” around 10 hours per week. The project goals were never achieved, but every year someone in the local government wrote glowing letters asking that the project be continued, and it was, over and over again, despite considerable staff objections. Nobody knows who was paying who, but it is almost certain that this was the underlying problem.

Cost and value of workshops and conferences

All workshops and conferences have a cost, but not all of them have value. It takes a substantial expenditure to run a workshop or conference both on the part of the organizers and the participants. Some workshops and conferences are popular because the participants are paid to attend, and receive travel and per diem allowances as well. These payments can be substantial relative to the pitifully low salaries paid to civil servants in most of the countries in the “south”, including quite high positions in the civil service system. For these people there is a money value that is quite tangible, but is an inappropriate justification for the workshop or conference.

Workshops and conferences may have a high professional value in facilitating networking and sharing professional experience. Some professionals may get significant value from this, and where this is going on, the costs may well be justified.

But more often than not, workshops and conferences do little more than cost money and do not very much. Even so, donors seem to be willing to support them because they are a quite visible way of showing that there is some activity actually going on that is tangible and can be used in support of public relations efforts to feed the media and other stakeholders.

Using metrics that measure relief and development progress, the majority of workshops and conferences do rather little in relation to their cost and the effort expended.

Cost and value of research and studies

All research and studies have a cost, bit not all of them have value. They represents a very substantial investment that is almost total value destruction. There is a huge archive of research and studies which is very difficult to access and use.
A study of studies in Lesotho
I was part of a team doing research on the rural sector in Lesotho in 1987. The TOR called for us to review the studies that had already been completed and not carry out any “new” work. When we arrived in Maseru to start the work, UNDP had collected for us most of the reports that we should review. The collection was stacked against a wall of the conference room and measured some 3 feet high and some 12 feet long.
The cost of preparing these reports was probably upwards of $20 million, a substantial amount in the context of Lesotho. The practical “on the ground” investment in rural sector development was tiny. Much less than the cost of all the studies. A prefect example of value destruction.
Research and study have no value in themselves. Their value is only realized when the results of the research and study are incorporated into some practical activity that improves socio-economic conditions in some tangible and durable way.

Valueless political rhetoric and press releases

There is a lot of political posturing and press releases, mainly about plans, or reports that have been prepared, but never about moneys disbursed, activities undertaken and results achieved.

This is not surprising because many activities do not achieve much in the way of result. In order to have relief and development success, resources have to reach the intended beneficiaries, and be funding activities that are useful for the beneficiaries.

The project and the project cycle

The project form of organization and the project cycle are key reasons why relief and development has failed.

The “project” form of organization dominates the relief and development sector, but it is not an organizational form that well suited to relief and development interventions. The “project” form of organization is arguably the best way to organize for a “one-off” project such as the construction of a dam, bridge or power station, but this form of organization is unsuited to providing financial support for routine activities of public institutions like education and health.

The project cycle the following elements:
  1. Identification;
  2. Preparation;
  3. Appraisal;
  4. Negotiation;
  5. Implementation; and,
  6. Evaluation.
In the course of my career I have been involved with all the different parts of the project cycle, and it is really no surprise that the projects end up costing a lot, creating debt, and not accomplishing very much.

Too much money is spent on identification, preparation, appraisal and negotiation, and the management and oversight dimension of implementation is almost totally absent. The ex-post evaluation stage is too little and far too late.

The project rarely has any life after the funding. This makes anything that a project does almost certain not to be sustained. The project form of organization adds another constraint to an already difficult situation.

Over the years I have worked with many World Bank projects. Almost all of them are designed in such a way as to be almost impossible to manage. They are too complex. They are often too big. They are often too constraining. They are too rigid. They do not go on long enough. They are just plain unmanageable.

The project approach to development has been the dominant mode for development since the very early days. The project form was adopted as a means to accelerate development, but has probably had the reverse effect. Rather than addressing the fundamental causes of development delay, the project approach avoids problems, rather than solving them. After multiple generations of 'projects' the problems still remain, and may well have been aggravated.

The project form of organization suffers from: (1) a short life; (2) an impermanent artificial structure; (3) issues of starting up; (4) issues of closing down; and, (5) all sorts of economic distortions, not least of which pay scales.

The damage done to government and civil services cadres by “projects” recruiting good people out of the permanent government system into the project is a serious and a huge cost to the “south”. Worse, good people have also had their local careers disrupted, though some have been able to move from local “project” to being part of the international elite in the relief and development sector.
Fish Meal in Malachal, Yemen (PDRY)
I was part of a World Bank mission to Yemen (PDRY) in the late 1980s to evaluate the performance of the investments program of the country. One of the investments was a fish meal complex in Malachal in the North of the country. A small fish meal plant had been built to prove the viability of the fishery, but very little fish were caught to supply the plant. Apparently some “experts” then recommended that 'economies of scale' and an even bigger fish meal plant would solve the problem of the failed smaller plant of the pilot project.

Of course, the problem was not the fish meal plant, but the fish resource. Two seiners had been operating and were catching much less than anticipated ... and with the resource in question it was totally irresponsible to invest a lot of money in a bigger fish meal processing operation.

In the original planning for the fish meal plant investment it was clearly set out that validation of the resource was a critical first step to be done before there was a major investment in fish meal processing. Subsequent consultants ignored this, as did the World Bank experts and the government.

No oversight

The relief and development sector which includes government units and parastatal organizations have very little meaningful oversight. In a broad manner, the legislative branch of government may have an oversight function over the operations of government, but the tool is clumsy, at best and is usually invoked a long time after the problem has done damage.

Such oversight as there is seems to be too little and too late. There seems to be a lot of audit when a problem surfaces, rather than good accounting so that the problem never arises in the first place. There seems to be all sorts of transparency when the problem has hit the media, and then only in ways that do not expose much of the organizations functioning.
Internal Audit and Oversight
I always smile when the US Government Accountability Office (GAO) is in the news. Quite often the press is reporting on a GAO report that has just been released and shows some substantial abuse of government resources. I smile because these reports usually come after the money has gone missing or been spent badly, and one has to ask who on earth is running the store.

How can these vast amounts of money get spent badly or go missing unless the system is absolutely broken or the people are seriously corrupt or incompetent. And why is it that an internal oversight function did not pick up on these things during its routine work.
It would be interesting to have the internal audit reports of UN agencies as part of the public record. It is my understanding that there is an active internal audit function, but I am fairly confident that unfavorable material is suppressed and never become widely known even inside the organization, let alone outside.

In my experience oversight works very well when it is flexible and unpredictable, and is pretty much a waste of time when oversight can be anticipated. But the relief and development sector has hardly anything that I would consider to be effective oversight.
Oversight and Control
In my corporate career we changed our oversight and control techniques frequently so that the staff would never know exactly how oversight was going to be carried out.

Very early on in my career I was faced with a “mafia” run scam where people in our organization and people in a big client's organization were collaborating to have truckloads of product shipped to their own warehouses rather than the client's warehouses. I found the scam simply by doing some rather basic reconciliation work with client accounts ... and learned all the aspects of the scam by having FBI agents work undercover in our shipping department.
Performance oversight

And oversight has little meaning when it merely looks at costs and activities and avoids the question of what is being achieved.
Global Fund
The Global Fund for AIDS, Tuberculosis and Malaria (Global Fund) has a strong procedure to analyze and approve programs for funding (arguably too strong and rigid because it excludes interventions which might be substantially more cost effective) and it provides easily accessible information about all the disbursements it makes to the primary recipients. But after that it is difficult (or near impossible) to find out what happened to the funds, and certainly not easy to find out what the funds were used for. No matter how hard one tries to find it, there is no public information about what was achieved using Global Fund resources.

Whistle blowers

Whistle blowers have been an important source of transparency in government and the relief and development sector, but it is not the right way to get information about performance and behavior.

Protecting whistle blowers is almost impossible, but making an organization responsive to the issues ought to be a “norm”, though presently it is the exception. There ought to be a strong system of oversight so that issue routinely come to light and can be addressed.

A system without accountability

The relief and development sector as a general rule avoids clear responsibility and accountability. There is very little systemic analysis that shows what results have been and calls to account the people that made the decisions and used the money.

“Projects” funded by the World Bank could be a clear focal point for responsibility and accountability, but rarely is. It would be possible to keep track of decision making, and call to account the decision makers later on, but I have seen little evidence that this is part of the Bank's management culture. Rather my personal experience is that staff move on an their decisions stay in the old place.
Management Accounting for UNDP
Some years ago (around 1992) I made a presentation to the UNDP Administrator's Office about “Management Reporting and Responsibility Accounting” and afterwards was given the basic feedback that none of the senior staff present had any understanding of the key words or ideas that I used in my presentation:
  1. accounts and accounting;
  2. responsibility; and,
  3. management.
Clearly this was a problem, but if you are operating without these things, why would you ever want to install them.

Around that time others were making efforts to improve this situation, and a very strong professional accountant was brought into UNDP on secondment from one of the most prestigious accounting firms in the USA. After just a few weeks his role as Chief Financial Officer was completely eviscerated by making his work purely advisory, and effectively worthless.
Who wants good accounting? Almost nobody. One would expect the corrupt and inefficient people in an organization not to want good strong accounting but it is even opposed by good and efficient people. Presumably they just do not want the hassle or they do not want to have to face any level of possible criticism. In the relief and development sector, the end result is decades of operation without very much management accounting.

Economic hit men

The business of business is “hard ball”, and the same goes for international affairs. It should come as no surprise that all sorts of inappropriate behavior is the norm rather than the exception.

The publication of information about “Economic Hit Men” is not really surprising. I did similar work to John Perkins, but without the “connections” that he had, and without the need to satisfy clients.

Rather I spent a lot of effort trying to get the relief and development agencies to change their project design so that it would actually do some good for the intended beneficiaries.
1 John Perkins. Confessions of an Economic Hit Man

Eventually I was deemed a non-conforming consultant and did very little work after that. A few bank staff who wanted objective assessment, no matter what the outcome, continued to give me assignments, but that is a small group.

Overall it is sad to say, the experts who advised inappropriate projects were able to get more funds and failure ... and therefore debt, than people like myself who did not want to do a project unless it was designed to do some good, and be repayable.

Foreign direct investment

Foreign direct investment (FDI) is a two edged sword when it comes to socio-economic development. It should be a winner for the beneficiary country, the communities hosting the investment activity and the people. But more often than not, FDI is a disaster for people, the host communities and even the country ... though there is usually an elite group that is able to profit mightily from foreign direct investment.

The value chain and value destruction

Value analysis will show a lot about the impact of corruption on the economy, and especially on the economy in the host community. The value chain from mine to consumer is not usually published and easily accessible, but it seems that there are huge value problems in many host communities and great value additions where the mining companies and oil companies have their tax shelters and home offices.

Value analysis shows that, more often than not, FDI extracts value from the host country rather than putting value into the local economy ... and combining this with the pattern of bribery and corruption, there are big value distortions when corruption is out of control.


Anything involving people is going to have some level of complexity, but the actual activities associated with relief and development should not be complex. In almost all cases, however, they are complex, and the World Bank especially, but also other organizations in the relief and development sector, seem to believe that complexity is not only acceptable, but desirable.

In my private corporate career the idea “Keep It Short and Simple” - the KISS principle was always being invoked.


Globalization ought to be a good thing, but there is not a global market with a flat playing field, but one that is controlled in all sorts of ways. The global economy and the relief and development sector have two parts:
  1. there is the international monetized economy; and,
  2. there is the informal and largely un-monetized economy.
The international monetized economy reaches the elites in capital cities, and wherever there are pools of foreign direct investment, but that is only 20% of the people of the “south”. The informal sector and the un-monetized sector ... also often remote and rural has no part in the globalization discussion.

In fact, more than 50% of the world's population has little knowledge of anything beyond what they can see and have personally experienced ... some 3 billion people. Included in this huge number are a high proportion of children, and a large proportion of these children will die prematurely, and of those that survive, many will never get an education.

Globalization ought to be helping, but it seems more than helping, it is polarizing and facilitating value flows from poor places in the “south” to the already rich countries of the “north”.

Market economics

The idea of a free market is academically appealing, but the free competitive market can be a very rough. A decent modern society is unlikely to be achieved merely by letting free markets to operate without any form of ethical intervention whatsoever.

There are very different market behaviors in surplus economies and in shortage economies ... and market behavior changes dramatically when there are cartels, oligopolies or monopolies. In most market situations there is some intervention, usually by groups that benefit from the system.

Though markets are difficult and sometimes produce results that are not the socio-economic best, they are often very much better than prices set by some political or administrative process. The economy of the Soviet Union was ruined by a system that made little use of market driven enterprise ... but though

Subsidies and unfair trade practices

Subsidies dramatically distort economic activity. The “north” has a big system of subsidies, mainly, but not exclusively in the agriculture sector. The scale of subsidy is substantial, typically larger than the fund flows into international relief and development. Subsidy is difficult to end in a democratic system because beneficiaries of subsidies wield considerable political power, and ending subsidy is fraught with political risk.
Distortion arising from subsidies
At one time I tried to export some powdered milk from the USA to West Africa. It took me a while to figure out all the possible combinations of buying prices in the USA and Europe that we might be faced with, as well as the likely selling prices in Africa. If we bought at a price that made a US or European farmer a modest profit the cost would be around $2,500, but if we were able to buy within the quota of available subsidized product in the USA the cost would be around $1,200. At this cost, with transport, insurance and duties we would have a landed cost of (say) $1,450. But if a competing trader was able to buy in Europe at a subsidized price of $1,000, then his landed cost would be around $1,200.

It was not clear whether or not the subsidized product would be available from Europe, but African buyers were not in a position to commit to transaction based on the US higher costs, because they knew that they also would be stuck if lower cost product were to come through from Europe. And they were also careful because from time to time the market would get flooded with “free” product that was originating somehow through the World Food Program (WFP).

Because the market was all over the place because of the subsidy regimes of the USA, Europe and WFP, traders had to protect themselves with absurdly high margins ... to the detriment of the African consumer. It was also apparent that some of the subsidy “decisions” were also influenced by political and more inappropriate relationships.

Not a pretty situation.

Chapter 5

Unlocking Latent Potential ... Optimizing What There Is

Starting point

In the relief and development sector there are huge opportunities but limited resources and ineffective organization.

We need to know much more about both opportunities and available resources, and get organized so that the resources are used most effectively.

Small steps

A strategy of major structural reform is unlikely to work. It has been “on the agenda” for as long as I have been associated with the relief and development sector, more than 30 years, and nothing much has happened. There are too many other competing interests and reform is too risky and potentially problematic. But evolutionary and incremental change with a focus on performance ... results, what is accomplished rather than how it is done ... might, just might be the answer.

There is no one best way

Where there are hundreds of things to do, and all sorts of people and organizations engaged in doing things, there is chaos. I do not pretend to understand chaos theory, but have some appreciation of the problems of organizing for good results in complex and chaotic conditions.
Getting good results when there is chaos
I was a participant in a Organization and Management Conference in the early 1990s run by OSI. One of the sessions was about managing in chaos. I forget exactly how the game was played, but I think we all had numbers, and a number of balls circulating in the group. If a ball was sent to a person number 10, the ball then had to be sent to number 11 ... but where was number 11? When the game started it was absolute chaos, and balls were all over the place. In a few minutes people figured out where to stand so that they were next to the person with a number different by 1 from ones own.

And then the rules were changed ... for example 10 had to send to 20, 11 to 21 and so on ... another period of chaos, but fairly quickly everyone figured out where best to stand.

There is a powerful capacity for human beings to problem solve. In complex chaotic conditions many small decisions can get a workable answer far more quickly than the academic planners , no matter how big their computers.
Getting the best results our of chaos is not something academic planners do very well ... in fact the record shows that they do it very badly. The “gosplan” type economy of the Soviet Union is one example, and I will argue that the “project” planning of the World Bank is another example.

Small activities can easily be done with very little organization and management and be very efficient. Other things needs to be done at a larger scale and with more planning and oversight. Some things are best organized on an even bigger scale at the national level.

Everything should be done in the manner that is best for the particular effort.

It is not only scale that varies. The mix of resources also changes from one situation to another. In order to get the best possible results, available resources should be used in the most efficient way. Human resources and natural resources are two key resources that should be used as effectively as possible for success in development.

They are more abundant in the “south” than money and machinery, and should therefore be used in preference to money and machinery wherever possible. Money and machinery should be used to the minimum and to compliment locally available resources to achieve maximum value adding.

What this suggests is that we should organize to empower a lot of people and organizations to make decisions, and then encourage people and organizations that seem to be getting it right and getting good results. This presupposes, of course, that there are metrics to identify good performance.


The basic process that needs to be in place is one where there is:
  1. planning;
  2. organizing;
  3. implementing;
  4. measurement;
  5. feedback; and,
  6. adjustment.
In most management literature, the “process” is depicted as a circle. I think of the process as a wave on top of a time line. In relief and development the process needs to be moving forward and progressing over time, and different elements need to get added into the plan from time to time as needed, and all the other stages as everything progresses ... and results need to be continuously measured and efficiency assessed.

This process is not the project cycle created 30 or more years ago by the World Bank and now widely used almost everywhere in the relief and development sector. The project cycle is static, while the process needed for success is dynamic and continuous.

I like to think of the process which has measurement and decision making and operations tightly linked as being not much different from skiing.
Water skiing ... skiing moguls
The process dynamic that is needed has to have some of the characteristics of water skiing ... or skiing moguls. During these activities (implementation) there is rapid assessment of the situation (measurement) and almost instantaneous feedback and adjustment to stay stable and moving forward.

Before setting out, some planning and getting organized. With a static project cycle like process, the skier would wipe out pretty quickly, and it seems that many World Bank projects have, in fact, done just that. In other words, the process needs to be iterative and it needs to be fast response.

Before you can plan ... measure

Before there is any planning, there needs to be information. This is obtained by measuring. Broadly speaking the more measurements the better. Some of the key information that is always needed: (1) How much do things cost? (2) What do they do? and (3) What results will be achieved?

This same set of questions need to be answered for almost everything that is done. It is the foundation of results based planning. There can be more information, but without these three elements of data, everything else is practically useless.


Good planning is an iterative activity where different options are considered and the best is selected. I see planning as being heavily influenced by data ... by the facts ... by realities. I see planning as being heavily influenced by results and performance ... that is the relationship between costs incurred and the value of the results achieved.

It is usually better to plan than not to plan. But I will always choose a good implementer over a good planner if I want to have real success. Plans are never right. Good plans are just less wrong than bad plans. Plans should be sufficient to get started and finalized as late as possible with the best available information.

A lot of the best information is not going to be available until implementation is in process, so do not waste too much time and resource on attempting to prepare the perfect plan. It will still need to be modified when the plan lands in the real world. More than anything else the plan should define what we are trying to accomplish.


The organize step is the first reality check. We know what we want to accomplish, but in a real world, how can we do it and how to organize to do it. What resources are needed to do what needs to be done, and are they available? What needs to be done to make resources available. Are people available? Are they trained and experienced and how best to organize so that they will work effectively. Are we allowed to do what needs to be done? How to organize in order to satisfy laws, rules and regulations.



Nothing is accomplished until there is action. Plans and designs are interesting, but not very valuable on their own. Someone has to pour concrete and do practical things so that value is created and progress made. People who are ill need to get treated to make them better. Students need to be in school and being taught. People need to go to work, get paid and do productive work.

This is the real reality check. Start doing the work and see what happens. In my experience more gets learned about everything we really need to know in the early days of implementation, and often things that would never come up in planning, almost no matter how well done. Good implementation managers know a lot of what needs to be known ... it is called experience.

Implementation is where all the resources come together in a way that produces results. People, organization, infrastructure, natural resources; machinery & equipment; working capital; money; and, knowledge all come together to make progress. Getting all of these things optimized to get the best results is not a simple matter, and trying to make progress when some of the important elements are missing or in very short supply is a big challenge.


Measure results. Start talking about what is accomplished and at what cost. Measure costs and results over the most suitable time period, but tend to the shortest time period that yields meaningful results. With a rapid iteration of information and related feedback it is possible to optimize performance more rapidly and get the best possible results at least cost.

Even the best of implementation managers will do better when there is a good system of measurement. Measurement should happen every day or at whatever time interval makes the most practical sense. Usually the shorter the time interval the better. Measurement should be done in ways that are easy, practical and reliable.

Measurement should result in information about costs, what was done and the results arising from the activities. In a mature measurement environment it should be possible to compare costs and results in a coherent way over activities in various different places and at different times.


But measuring results and talking about them is not sufficient. The information about results needs to be part of a feedback loop so that there is more and better action. The process is a continuing iteration. There is no point in measurement if it is not used. There must be feedback, that is, ways to get the measurement and its analysis into the system so that people learn and better decisions can be made.



And there must be use of the feedback in the implementation so that performance is made to be as good as it can be.

Who does planning?

Everyone does planning. Planning is part of a public local dialog.

Planning is no longer dominated by either the Soviet style Gosplan or the World Bank and IMF equivalents. Instead planning is done in a “distributed mode” where people close to the activities and the needs plan to optimize and get the most result for the least use of resources.

The best planning will be done in communities, and then the plans will filter into sector and organizational plans and be visible as a basis for funding decisions and the optimal allocation of resources.

How does this get coordinated?

Coordination is accomplished using data about performance that is practical and public. The data are made coherent by having a focus on people and community, and how all the other interactions result in making progress for people and for community.

When there is good information about a community, it becomes reasonably clear what mix of activities are likely to be priority, and it is then possible to help a community based on priorities that are meaningful for the community, and then other communities and then more and more communities.

This can be systematized so that it is low cost and results in a meaningful coordinated response.

Do the most with the least

If there are limited resources it is irresponsible to do anything other than to work at doing things the very best possible way, and in the most efficient manner. A relief and development sector culture that spends the minimum and gets the most value for money is going to get more socio-economic progress than one that spends without regard to the results being achieved.

Do the most with what is available

An even better result is going to be achieved by a relief and development culture that uses the available resources to get the best possible results.

Making the most of what you have

When I go to the cupboard or refrigerator to find something to cook, I blank out unless there are some simple things like eggs and sausages. When my wife goes into the same raw food collection, she finds all sorts of things to cook, and a five-star meal results. I am not a good cook. My wife is.

There is a similar situation with relief and development planning. To get the best results, there need to be people that understand haw to combine the various resources available to get some good results.


I have been interested in performance and its measurement for most of my life ... in athletics ... in motor sports ... in corporate profit performance ... and in relief and development performance.

Nearly everyone seems to know how to measure performance in sport, and understand the statistics, but when it comes to the more serious areas for measurement, people suddenly do not understand anything.

In order to make progress, there has to be a way to get better performance, and the starting point is to start measuring it.

We should start by measuring easy things, and then logically progress to things that are more difficult.
The thermodynamic idea of efficiency
I got a jump start on how to measure performance as a student engineer doing thermodynamics ... measuring the efficiency of various ways of converting energy to work ... and learned the practical and simple idea that we measure inputs and we measure outputs and compare the relationship. We can easily measure efficiency or performance without having to know all the details of what happens in between. The measurement of performance that works for a steam boiler or an internal combustion engine can be applied in the analysis of business and economic performance.

Organizational differences

Performance shows up in a lot of places. For example: why is it that one company gets better results than another company in the same industry? How did General Electric in the USA flourish and Blaw-Knox, Westinghouse and others in the same industry essentially disappear? The answer appears to be that General Electric deployed its resources better, and over time, of course had more resources to deploy and then drew further and further ahead.

General Electric seems to have organized better, adopting a better strategy and executing its implementation better.

Looking at business performance, it becomes clear that performance has a lot to do with how the company is organized, how the various pieces fit together and work in harmony, and how it runs itself. The absolute amount of resources is not as important as having the right amount of a variety of resources, and using them together in the best possible way.

Do the most with the least

If there are limited resources it is irresponsible to do anything other than to work at doing things the very best possible way, and in the most efficient manner. An organizational culture that spends the minimum and gets value for money is going to get far more results than one that spends without regard to the results being achieved.

Chapter 6


Management Information,

Planning and Process

Management information, planning and process

The relief and development sector has a lot of data, but very little of it is “management information”. Without management information is it not easy to make good decisions. One of the priorities has got to be to improve management information in the relief and development sector.

The relief and development sector has a lot of planning, but it is not the sort of planning that results in very much getting done. Another priority is to get planning so that it does help to get things done. The relief and development sector has little “process” that “connects the dots” ... that helps to convert resources into the values that are the most needed by people and the society at large. An effective process needs to be put in place so that sustainable socio-economic progress can be made.

Management information and planning do not have much value in a free standing state, but need to be integrated into a process. Together they are very valuable.

Management Information


A public program for management information about the relief and development can be set up with a rather modest financial investment. The cost of the technology is rather low compared with the cost of the information. In terms of Tr-Ac-Net value analysis, we consider management information for the relief and development sector to be of enormous value.

Documenting Success

The relief and development sector has been responsible for around $50 billion annually of fund flow for relief and development. Recently the number is bigger, and if fund flows associated with reconstruction in places like Afghanistan, Iraq and Lebanon are included the numbers are “off the charts”.

At the present time there is little believable and verifiable reporting of the use of funds and the value of the various interventions. At the end of the day nobody seems to have any idea what the money was used for and what results have been achieved. It certainly is not “a click away” and easily accessible on the Internet.

This absolutely has to change.

There needs to be systematic, verifiable documenting of the disbursement of funds, the use of the funds and the results being achieved, short and long term. This is very basic accounting, and without it, there will never be an accountable relief and development sector. It is totally reasonable for people with funds to be unwilling to fund any situation with inadequate accounting, but conversely, a good system and good information should facilitate the mobilization of resources.

Nobody knows what proportion of the relief and development sector fund flows are used responsibly and what is totally ineffective. With management information, it should be possible for resources that are being used inefficiently in the existing relief and development sector programs and organizations to be diverted to more efficient use, and for incremental private fund flows to be added into the activities that are demonstrated to be effective.

Coherent Framework of Analysis

I have three perspectives on measuring performance from engineering, economics and accountancy. They all have their place, and together they are very powerful. Any one technique can give some information, but together they serve to give a fairly good comprehensive picture.

Balance Sheet

One of the most powerful ideas from accountancy is the idea of a balance sheet. It is central to corporate accounting but also works as well in the field of relief and development There are assets and there are liabilities ... resources and constraints. Net assets is assets less liabilities. Net resources is resources less constraints.

Progress is when a community increases its net resources over a time period. This is very similar to the idea in corporate accountancy that a profit is the difference between two balance sheets.


In the relief and development sector, there is a critical need to deploy resources in the best possible way. There are at least eight critical resources. These are:
  1. People;
  2. Organization;
  3. Infrastructure;
  4. Natural Resources;
  5. Machinery & Equipment;
  6. Working Capital;
  7. Money; and,
  8. Knowledge.
The first step is to have a very good understanding of the resources that are available, and in what ways they can be used.


A lot of the time constraints are the lack of a specific resource, as defined above.

But constraints can also be active intervention from outside. For example: regulations imposed on imports from the “south” into markets in the “north” can make it impossible for a local business to maximize success.


Economists use statistics a lot more than accountants (who rarely have any use for statistics). This can help expand information beyond where an accountant would be comfortable to go. But statistics should never be used to manage and control fun flows and the management of valuable assets.

Measuring efficiency

Engineering thermodynamics pays a lot of attention to the concept of process efficiency, and its ideas are very relevant to the analysis of relief and development performance. Efficiency is the ratio of what comes out to what goes in expressed in the same units ... thermodynamics is usually concerned with engineering matters like how much gas is used to drive a car so many miles, while socioeconomic performance is concerned with matters like how much money to achieve an improvement in health. In both case there are measurements of inputs and measurements of outputs ... and performance is obtained by comparing the two.

Fund raising information

Fund raising outside of the existing relief and development sector framework needs to be established and the right sort of information made available so that it can be scaled up to millions and billions. This is entirely possible with the effective use of information.

Walking, not just talking

The reason for a public program is that up to now transparency and accountability are on the relief and development sector agenda only as discussion points. This program moves the issue of transparency and accountability into action ... essentially asking for old fashioned accounting, but in the public space. It responds to the question “Accountable to whom?” with the answer simply “The public”.

The meta data, or the data about the data needed for management information for the relief and development sector has been developed based on past experience (but is not adequately tested yet, and not ready to be included in a publication).

A MySQL database has been set up using third party hosting and some preliminary information has been uploaded into the database. In a pre-Beta test, it appears that this will work for a first phase. The network of contributors is needed that will compile information about their communities, and put into a form that can be uploaded into the database. Local spreadsheet computing can be used to help organize data locally and be the basis for uploading information into the database.

Another network of contributors is needed to supply information about the activities of organizations, including projects. Any organization that professes a commitment to “transparency” should be willing to supply the key management information needed. The basic elements are
  1. money used;
  2. where used;
  3. activities funded (money amounts and where);
  4. resultant durable value realized as a result of the activities and where.
In addition the total of money used should be related to total of money received, with an analysis of where money came from.

None of the organization information should be difficult to report. The challenge is relating the money information with the where. This information exists at the detail level in almost all organizations, but I am not sure to what extent it has been organized into a reportable form.

A key validation is going to be the reconciliation of what organizations think and say they are doing with what communities see they are doing. This is a key issues, and should be put into the public debate as fast as possible.
Phantom Aid
In 2005 ActionAid described aid flows as “Phantom Aid” with more than perhaps 30% not reaching beneficiaries. My own experience suggests that the problem is far worse, with many situations where no money reaches the beneficiaries that need assistance.

This is not the place to go into detail, but I did an assignment in aid coordination with the Government of Mozambique in the early 1990s and similar work in Namibia just after its independence.

I reviewed hundreds of project proposals prepared by potential donors. Very few addressed the priority needs of the beneficiary country, even though these needs had been studied and documented over and over again.

Neither donors nor NGOs are particularly interested in seeing hard analysis of their work ... but until this is done the relief and development sector will perpetuate “Phantom Aid”.

Managing information for effectiveness and security

This problem has already been faced in a lot of corporate information systems including the banking industry and health institutions. In these cases there is a legitimate interest in keeping some information private and confidential and at the same time easily accessible to those who have a need to know and are allowed to know.

An individual wants to be able to get access to information about his/her bank account, and wants the bank officer to be able to see it when it is going to be helpful to facilitate an banking transaction. But the information should not be accessible to others. This is a reasonable privacy framework, and has been implemented by the banking industry.

An individual wants a doctor to be able to access his/her medical history so that the doctor can do a good job, especially in an emergency, but does not want the world at large to have access to this information. It has taken the health sector longer than the banks to implement effective systems to handle this and a lot of information still cannot be accessed easily and electronically when it is needed, but it is improving.

So the idea that a system of “public accounting” can be private and secure, as well as being easily accessible to authorized users, is not too difficult to envision.

The issue of security of the information is being addressed. The intent is to have local community information fully accessible to the data collection team in the community. Only a limited number of database administrators and authorized researchers will have access to this information in its totality.

The community information will be available in an “accounting” form to build up a matrix of fund flow information, and a related matrix of value adding.

A similar security framework will be used for information about organizations. The contributors that provide information about organizations will have access to that information, as will database administrators and authorized researchers. Otherwise this information will only be accessible within the accounting framework and the management information derived from this.

Characteristics of good management information

I think of management information as being the least amount of information that will enable good decisions to be made reliably. There is a dynamic to management information that is different from the data that is used, for example, in scientific research where one is trying to confirm a theoretical hypothesis.

Management information is not complex. In fact, good management information is simple and clear. Management information can be described as “the least amount of information that enables the best possible decisions to be made reliably”.

Management information is best when it is timely. Getting information late when the damage is done, has little or no value. Management information is built on lessons learned well before a crisis has developed.

In the relief and development sector, there is virtually no “management information”. The data are voluminous, but seem to merely exist to support an organizational set-up that has become powerful but ineffective, and with no plans to change in the ways needed. Simply getting systematic information in response to the questions:
  1. What does it cost?
  2. What is being done? and,
  3. What is the value being generated?
would result in a major new subset of data that addresses performance.

Mere measurement improves performance

In my experience, people do much better work when it is not taken for granted. Making measurements shows interest and demonstrates that the work has some importance. Not surprisingly the measurements often document performance improvement, which can be rewarded and also stimulate self-starting improvement initiatives.

Mere measurement improves performance

My experience as an accountant working with management information has convinced me that mere measurement makes a huge difference to performance. All sports measure performance, and have done for a very long time. The corporate world did a big upgrade in their approach to measurement and management information with computerization in the 1960s and 1970s ... and productivity improved (based on what I observed in my work).

When I explored this more, I found that it was possible to get better performance with very simple measures that were not necessarily part of a big system.

One accounting supervisor I worked with (she had more than 50 years with the company) had a “beat yesterday” book that had daily sales for the company tabulated for decades. Her goal was simply that the company shipped out more today than yesterday ... and she had been pushing for this for decades ... and it worked. It was the first accounting information that came out of the department every day, and everyone took notice from most junior worker to the CEO!

Metrics for community progress

Tr-Ac-Net has pioneered some of the ideas of socio-economic performance reporting. Specifically Tr-Ac-Net has been an advocate for using the community as the key focus for socio-economic performance metrics. An organization may be here today and gone tomorrow, so also a project, but the community stays in the same location for ever.
Okehampton, my home town
Okehampton is a small town in Devon, England. My family moved to Okehampton when I was five, at the end of the Second World War. At that time it had a population of about 4,000 people, slightly up from a pre-war AA book listing that reported around (as I recall) 3,800 people.

It was a small farming town. Nothing really special. In fact it was rather less important in 1945 than it has been almost 900 years before. William the Conqueror came to England in the UK, and almost immediately documented what was in England in the Doomsday Book. Information about Okehampton is in the Doomsday Book, and to consolidate the western frontier a Norman castle was built to fortify the village.
I learn from this that a geographic community has a near perpetual existence that is very valuable when developing management information. People, organizations, projects, and governments come and go, but the place is for ever.

Keeping Score

One of the components that has been missing in development is an accurate score card of wins and losses. A winning team is always going to look at a defeat and learn from it. A winning mindset takes a setback and knows that they will come back stronger next time. The relief and development sector has not embraced such a mindset, and thus there has been little analysis of and accountability for failure.

There has been a substantial fund flow for relief and development for around 50 years. After this length of time, it is still difficult to get any sort of answers to the simple questions of how much things have cost, what was done with the money and what results were achieved.

These are not difficult questions, but the leadership and the majority of the staff in the relief and development sector organizations are uncomfortable when they are asked.

Cost Accounting

Cost accounting or cost and management accounting is a subset of accounting that provides the basic information needed for management decision making.

One of the most basic management needs is to know how much things cost. If managers do not know how much things cost, then decisions cannot be based on reality but on something else. What that “something else” is may well be anti-social and inappropriate.

Cost accounting does not have much value when it is a purely clerical effort. It needs to be an integral part of the organization's thinking, and part of decision making. This is now almost taken for granted in good for profit organizations, but not at all common in the public sector and the NGO not-for-profit sector.

An organization needs to have information about what things cost, not in a single simple and historic way, but in a dynamic manner so that cost “behavior” is understood. Almost every cost has a behavior that makes it possible to make good decisions and reduce cost, while at the same time optimizing the activity and the value being generated.

And lowest cost is not necessarily the best cost. So cost needs to be related to other aspects of the organization. A cheap low quality component in a complex expensive assembly can end up being very costly ... this is not a simple issue, but it is very much a cost accounting issue.

Cost analysis as foundation for strategic decisions

At one point in my career (in the early 1970s) I worked for a technology company. One of its product lines were rechargeable batteries ... at the time mainly used in the aerospace industry, and increasingly for the IT industry. We were trying to make inroads into the consumer market, but our battery technology and manufacturing process had costs that made us uncompetitive compared to our major competitors in this market segment.

I learned everything I could about the engineering technology and the manufacturing process ... and the cost of everything. With the cost facts our company was able to think through what to do, and how to address this problem and make profit. What might be thought of as “grunt” work is not.

Because we knew a lot about the costs of this segment of the business, we were able to create a strategy that stopped our losses, and to refocus our future with a leap-frog of technology so that our next generation products would be low cost and competitive.

The cost accounting done at the time was very detailed ... but the results of this analysis are visible 25 years later in the structure of the global battery business.
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