COMMENTARY

Peter Burgess

Accounting and accountability ... Essential data for development analysis

The issue of accounting and accountability has been on my agenda for a long time. I sent the following e-message about the Official Development Assistance (ODA) community makes almost no use of accounting as a part of its management toolbox to a list in 2000

Essential data for development analysis - follow up 2000/11/28 Dear Dr. David Newman and forum participants

In response to our posting on essential data for development analysis Dr. David Newman (d.r.newman@qub.ac.uk) replied:

Profitinafrica@aol.com wrote: >>>> The Official Development Assistance (ODA) community makes almost no use of accounting as a part of its management toolbox. >>>>

That is clearly not true. Since before the days of Little and Mirlees, it is development economists who have led the development of the field of social cost-benefit analysis. It is development economists who first drew attention to externalities, ignored in the standard project financial accounting, from effects of exchange control on exchange rates, to unpaid work done by women.

In fact, if anything, they can be criticized for trying to reduce all evaluation to a single shadow $ figure, rather than keeping separate the different dimensions on which one might wish to evaluate a project.

Now that currencies are becoming figures in a computer, it is even possible to maintain separate non exchangeable denominations for commercial wealth, social wealth and environmental wealth, as suggested in Geoff Vincent's article in Peter Lloyd's book, 'Groupware in the 21st century' (London: Adamantine Press, 1994).

Dr. David R. Newman, Queen's University Belfast,
School of Management and Economics,
Belfast BT7 1NN, Northern Ireland (UK)
mailto:d.r.newman@qub.ac.uk Tel. 028 90335011 FAX: 028 90249881
http://www.qub.ac.uk/mgt/staff/dave/

I appreciate this response to my grumble about the lack of essential data for development analysis...... and my focus on the lack of accounting information. I agree with Dr. Newman that there is no lack of academic capacity to do quality analysis. I agree that academic economists have done a good job at expanding the value of numerical analysis beyond the simple 'single number' focus of beencounter accountants.

But my concern is a far simpler issue. The official development assistance (ODA) community has a very low opinion of the value of and importance of good basic accounting procedures and practices .... keeping books of account ..... filing vouchers and records ..... preparing reports ... etc. As a result ODA institutions have very bad processes for accounting ....... and the reports generally produced have very low management information value. Dr. Newman has observed that development economists have led the development of socio-economic cost-benefit analysis .... etc ..... but the management of resources in development has nevertheless been a horrid disaster .... with development progress tiny compared with what could have been and should have been.

Government and ODA accounting almost everywhere in the world still uses the cash basis system that has not been significantly improved since the 19th century ... and is virtually useless as a basis for useful management and performance information .... as well as being weak for control of organizational assets and liabilities. My concern is that Government and ODA institutions just do not have good accounts and do not recognize that they do not have good accounts. Additional concerns are:

1. that to the extent that good accounts are available .... they are difficult to access and use for analysis.
2. that it is very difficult to get consistent time series accounting information about government and ODA operations.
3. that it is very difficult if not impossible to get cost accounting information for longitudinal (time) comparison and geographical (spatial) comparison.

An opportunity presents itself at this time is to make accounting a strong foundation for analysis of government and development performance. The basic principles of capital and expense (profit and loss / recurrent) and the idea of balance sheet accounts and accruals are already well established. The accounting processes used to record data are well understood ..... keeping the books ..... entering the journals ..... preparing the vouchers ...... and so on. But the processes to prepare reports are weak ..... mainly because of the manual history and manual practices.

Accounting can be modernized very quickly using modern ICT ...... using a well designed relational database environment and the web/Internet environment. SQL with a logical data design is very powerful and the accounting data can be used as a basis for a lot of knowledge about development performance.

It would be very valuable to have reliable and auditable accounts that show how much official development assistance has been used year by year in each country and to see what results were achieved as a result of this ODA support ...... and to have the ability to 'drill down' more and more to the individual components and see costs and related results. This sort of analytical work has become routine in the corporate world and has been responsible for some impressive improvements in value chain performance. It should be possible for development resources to be managed with some of the same analytical power.

But the fact is, at the moment, the ODA community does not ..... or can not ..... or will not ...... do even basic bookkeeping and analytical accounting.

This is a serious observation ..... and I do not make these remarks lightly.

Nothing I am saying detracts from the importance and value of good analysis using the tools of development economics ..... what I am saying is simply that good accounting and financial data gives good economists something that is worth analyzing. I argue against using economics and economists to do the work that accounting and accountants should be doing.

With regards

T. Peter Burgess