Governance and Accountability in Australia - Literature review Example

Governance and Accountability in Australia Governance and Accountability in Australia Introduction Governance is defined by the Australian National Audit Office (ANAO, 2009) as the process through which government or corporate organizations are controlled, directed and held accountable. This definition covers structures, policies, culture and strategies among the other different ways that organizations handle the stakeholders. Governance also includes ways through which organisations prove that they are prudent, open and accountable in decision-making. ANAO also defines accountability as the process adopted by individuals working in an organisation for the sake of upholding responsible decisions and actions that would withstand scrutiny from other stakeholders. In order to do this, organisations put in place defined roles, which are attained through robust structures. According to the World Bank (2007), accountability is an unstructured concept that is hard to define. However, it is almost obvious that for accountability to occur there must be a relationship between organisations or individuals and performance tasks, which are subject to the direction or oversight of some other individuals or organisations. Though accountability has always been part of governance, it is only after its admirable results in the private sector that governments throughout the world have revisited the issue with renewed vigour. This study seeks to establish some of the challenges faced by the Australian government in meeting accountability expectations, and the additional lessons that the government can learn from the private sector in order to make governance even better in the country. Governance-related accountability challenges in Australia According to ANAO (2009), the federal government works within an accountability framework that requires to uphold the ethical, efficient and ethical utilisation of the country’s resources; maintain recorded systems for government decisions and processes; maintain a public reporting system in order to ensure transparency in governance; allow external scrutiny by other government entities such as the Ombudsman or the auditor-general; and protect any personal information as provided for by the commonwealth legislation. Further, information that requires some of level of protection can receive the same through identification and protection as stipulated in the commonwealth provisions. The federal government also acts for ministers in the provision of evidence to parliament and also has the right to respond to any requests made for information as long as such requests are made for the sake of open government. The main challenge as identified by this study in consideration of the details provided by ANAO above is that the commonwealth state of Australia remains a multi-layered environment that needs a clear government accountability structure especially in service provision. Compared to the private sector where agencies or organisations keep pace with their own service provision, the government clearly lacks the measures needed to keep pace with service delivery. Later in this study, the use of performance measures as is common in the private sector is identified as one of the ways through which the government can up its game in governance and accountability. This study has also identified that improved information sharing in the public sector could increase the chances of successful governance and accountability as witnessed in the private sector. Accountability in governments vs. the private sector The government of Australia is made up of the executive, the legislature and the judiciary. The branches of government provide horizontal accountability to each other. The judiciary and the legislature for example check the executive while the executive can check the powers of the judiciary or the legislature. According to the World Bank (2007), horizontal accountability is usually practised in autonomous government institutions which have the ability to question and even punish abuses or excesses in governance. This however does not mean that the Australian government is only subject to horizontal accountability. The citizenry, civil society and the media are also part of the equation that challenges, questions and even demands better performance from government. The World Bank (2007) calls such initiatives vertical horizontal accountability. For this to succeed however, the legislature, which is made of elected representatives of the people, needs to offer support to the citizens, civil society or media in order to pass the message across to other arms of government. In 1989, the then auditor general in Australia defined accountability as a necessary step in preventing abuse of power and ensuring that leaders direct their power to achieving acceptable goals with the highest possible efficiency, probity, prudence and effectiveness (Trimmer, 2004). While he said this in relation to government bodies, it is the private sector that seems to have taken this advice to heart. They not only use it in financial reporting and accounting, but also in other areas such as risk management and setting up audit committees. More than 20 years down the line, the public sector can learn a few lessons from the private sector regarding good governance and accountability. Some of the elements that can be observed in the private sector can also be observed in the public sector albeit with some half-baked results. They include: leadership, good working culture and good work ethics; maintaining good stakeholder relationships; proper planning and putting performance monitors in place; conformance to set rules and accountability; and risk management. Mulgan (2003) observes that collective accountability by the government is usually owed to the citizens of the country mainly because citizens give governments the authority to represent them and secondly because any action by the government directly or indirectly affects the citizens. For the private sector on the other hand, owners of an organisation or a corporation may not necessarily be the ones affected by its actions. The actions may also affect neighbouring communities, the employees and other organisations it does business with, in which case the private entity would have no means of maintaining accountability to such parties. The difference mentioned above therefore means that whereas the government may use the courts, legislature and elections to account for its actions to the citizens, the private sector has to adopt completely different measures of accountability. Usually, this requires the directors to be accountable for actions of the private organisations. Just like the government seeks to uphold the interests of citizens through accountability, directors in the private sector are charged with ensuring that the interests of stakeholders are upheld at all times. Another difference between accountability in government and the private sector is complexity. The government is by nature an extensive web of departments, organisations and ministries. Private enterprises on the other hand are less complex, thus implying that accountability can easily be enforced. According to ANAO (2009), making accountability a reality in Australia has seen the creation of extensive legislative frameworks, which are designed to ensure that transparency, accountability and good behaviour are upheld in public entities. The Public Service Act enacted in 1999, the 1999 Financial Management and Accountability Act as well as the 1997 Auditor-General Act are just some of the legislative framework that govern government accountability in the country. The activities within government organisations are further scrutinised by statutory bodies such as parliament through the senate committees, ANAO and the Ombudsman. The accountability framework in the Australian government is meant to not only provide equitable services to the citizenry, but it is also meant to maintain high standards in behavioural ethics. There are fears that accountability measures in government usually results to risk aversion, while this is not usually the case in the private sector. ANAO (2009) observes that usually the difficulties that public officials face while trying to quantify risks especially factoring in the lack of markets, translate to different risks from what is usually observed in the private sector. In the private sector for example, the legislative risk is interpreted as the compliance risks and associated costs. In the public sector on the other hand, a legislative cost is judged on its appropriateness, consistency with prevailing laws, political risks, legal challenges, implementation risks and unanticipated responses that may arise should it be enforced. ANAO (2009) also notes that the reputational risks that motivate accountability in the private and public sector are different. While a manager or a CEO in a private sector organisation may fear the personal, financial, organisation and commercial implications that lack of accountability may cause the organisation, a public service official will have to be wary of similar risks and others which include reactions from the public, ministerial and cabinet reactions among other political risks that may face the public institution. The most notable thing from this analysis is that accountability measures in the private sector are more clear cut, while the same in the public sector has more complex systems and measures, which are mainly tied to the cultural paradigm in the country that includes political forums (parliamentary), media and the public (general citizens and the civil society). Can private sector accountability measures be applied to the public sector? Having established that the public sector is more complex than the private sector in the section above, this part of the study will assess if indeed the accountability measures that have led to much success in the private sector can be used in public institutions. This study has chosen to concentrate on performance measurement as one of the strategies that have been used in the private sector successfully and which can also be adopted for use in the public sector. According to Hodges (2005), performance measurement is a tool that can be used not only in accountability, but also in enhancing effectiveness and efficiency in public institutions. Hodges also observes that performance measurement has been tried before in public institutions without much success mainly because agencies that seek to use it do not do enough to fit the measures within the broader objectives of the organisation. Further, the inappropriate use of financial measures to evaluate accountability in public organisations usually means that the results remain of little significance especially where public organisations are pre-occupied with efficiency as opposed to when the same is used in profit-making organisations in the private sector. Halligan (2001) suggests that for performance measurement to work effectively in the public sector like it has in the private sector, the necessary alignment and integration of performance reporting needs to be enforced to address both internal management and external accountability needs. The systems put in place to oversee performance measurement in the public sector must also balance the needs presented by different stakeholders. It is also notable that public agencies are usually under pressure to perform against pre-set targets. This study holds the opinion that unless due consideration is paid to the targets and performance measures to be used during decision-making meetings, planning the right course of action which will allow the performance measures to be met will not be realised. This usually means that not much result is achieved even when pressure is mounted on agencies. As noted by Mulgan (2003), the objective-based accountability system in Australia has many a times failed to meet its outputs and outcomes targets because of the communication disconnect between the ministers in government and the civil servants who are usually concerned about the effect that the accountability objectives set at a cabinet level may have on the wider society. Notably, this usually occurs where financial reporting requires the public officials to consider the outputs and outcomes. Noting the difference in size and structure between the public sector and the private sector, Mulgan (2003) suggests that performance structures which use performance indicators, targets and goals should not be incorporated in the budget. Rather, the Australian government can adopt a system that appropriates funds separately. This may however require the development of strategic performance measures and goals along the set budget frameworks. This study however appreciates the belief that ultimately, the government would have to integrate financial and planning systems if it is to meet the standards set by the private sector. Mulgan (2003) holds the opinion that only when managers in government departments can be able to cost objectives and outputs separately, will they be able to exercise financial control as is the case in the private sector. It is also apparent that the government rarely accounts for the results in its different sectors. In line with strategies adopted in the private sector, this study notes that while the private sector (except for non-profit organisations) have economic bottom-line as one of the core objectives of accountability, the government cannot lay its eyes exclusively on the cost of services without due consideration to citizen satisfaction, their interests, equity and justice. This notion is supported by Barret (2000) who observes that “public service agencies must strive to maximise overall ‘value for money’ for citizens, which requires consideration of issues other than production costs...” (p. 58). This clearly means that just as much as government should strive to attain accountability in all sectors, it should also ensure there is a balance between the accountability measures and the efficiency objectives. Based on the above argument therefore, just what kind of accountability is best suited for the Australian government? Well, according to ANAO (2007), the government needs to strike a balance between achieving cost-effective outcomes and adopting accountability measures that serve the public well. Such can be done by ensuring that public service managers are equipped with the right skills to manage government projects and contracts; all commercial relationships should be based on enforceable contracts, administrative processes and sound tendering processes; finally, public reporting should be done diligently just as the auditors-general activities in order to ensure that there is external scrutiny, which would in turn ensure that there is no erosion to public accountability (ANAO, 2007, p. 55). ANAO (2007) further suggests that by adopting a form of governance that is similar to what is practised by the corporate organisations, the government would have a mechanism through which it can manage and transcend risks. A sound framework in corporate governance would assist government in risk management, business planning, and performance monitoring and consequently shift the accountability attention from government processes to outcomes. When assessing and handling risks, managers in the public sector can learn some lessons from their counterparts in the private sector. Such include being mindful of interests and transparency needs as presented by the citizenry. Types of accountability in Australia’s public sector Halligan (2001) states that accountability in the public sector is manifested in different ways. This means that the public officials depending on where they work and the amount of responsibilities they handle face different kinds of accountabilities, which include: political accountability which takes place between elected political officials; public accountability, which is owed to the citizens of a country by the elected officials and the government at large; legal accountability, which is owed to the judiciary; professional accountability, which requires people to oblige to set standards and practices in a specific profession; and administrative accountability, which is accorded to the public by non-political entities in government such as the auditor general or the ombudsman. Braithwaite and Levi (1998) hold the opinion that for good governance and accountability to occur, a country must possess strong laws, which should be strongly enforced. They however argue that as long as the public and the government are concerned, there ought to be some measure of trust. To the two authors, good laws and trust enforce each other for purposes of ensuring that there is accountability in governance and a specific country is able to have development as a result. For a government to be trustworthy to the public therefore, it has to be fair in instituting set procedures and must also ensure that its actions towards government commitments are credible to the public eyes. Examples of accountability measures in Australia Australian Parliament Funnel and Cooper (1998) argue that the Australian parliament is at the heart of good governance and accountability (p. 1947). Apart from its basic law-making mandate, parliament is also mandated to hold the government accountable especially in the use of powers granted to it by the society and the country’s resources. Notably however, the Australian parliament has undergone some changes that have seen it use the auditor-general to help it in holding the government accountable. While as this has helped parliament play it mandate well, there are some arguments that this has weakened parliament’s role as the accountability checker. Funnel and Cooper (1998) further observe that because of parliament’s reliance on government for funding, its watch-dog role has diminished considerably over the years especially because ministers can prevent relevant papers from being tabled in parliament (p. 1947). Further, the premier is capable of advising a governor to prorogue house sessions in order to avoid debates that are not government-friendly. This is especially the case in New South Wales parliament. Where auditors-general do their work diligently to ensure some form of government accountability, Funnel and Cooper (1998) observe that criticism from the government can be expected (p. 1947). When faced with such criticisms, the auditors-general are not expected to respond to the government, which even raises more trust issues between the people and the government. With members of parliament representing the ordinary people, parliament’s failure to hold the government accountable for its use of resources or other actions is in most cases translated to mean that the government is not committed to transparency. According to Braithwaite and Levi (1998), the willingness of leaders in government to share government activities with the ordinary folks reflect its readiness to trust and be trusted by the citizenry (p.234). According to Hodges (2005) however, accountability in the contemporary world is not simply a matter of good government performance (p. 231). Rather, the processes that a government undertakes, which include equity in resource allocation and giving people access to the same are gauged through their outcomes and it is such outcomes that give the general public an impression of just how well the government is fairing in governance. By quantifying governance through outcomes, the public is able to use the same benchmarks to measure government’s accountability. By Australians paying taxes diligently, they expect the government to be equally diligent in the provision of public services such as education, good roads and basic infrastructure in the country. Failure to do this will be interpreted as a lack of accountability in the use of tax-payer’s money. This means that accountability measures have taken quantitative measures especially where financial matters are concerned. Questions on effectiveness of the accountability mechanism in regard to government-public relationship however is not satisfactory because in areas where government has misappropriated the tax payers money, the taxpayer does not have a substantial recourse since they cannot hold back their taxes. The Australian Constitution The Constitution being the supreme law in Australia has its fair share of laws that ensure that government and public office holders are accountable to the people. According to Funnel and Cooper (1998), there are three outstanding Acts in the Constitution that demand the commonwealth government to be accountable to the people. They are the 1997 Accountability Act, the 1997 Auditor-general Act and the 1901 Constitutional Act (p. 52). Sections 53, 56 and section 86 are also other provisions in the constitution that require the government to be accountable to the public especially when handling public finances. Conclusion Governance and accountability are conjoined and no government or private institutions can be able to attain one without the other. In cases where there is no good governance, it is most likely that accountability measures are lacking. In cases where accountability prevails, good governance is almost always the case. Generally, accountability provides the checks and balances in government and private institutions needed to ensure that no entity, sector or person abuses power while in office. More to this, leaders have no alternative but to meet the expectations of their public through admirable outcomes and outputs. Overall, it must be noted that good governance and accountability are not ends to themselves. As observed even in the developed countries, the efforts to attain good governance and accountability are a never ending process that governments and the governed public continue to strive for. The government can however learn some vital lessons, which have so far performed much better in governance and accountability. References ANAO 2007, Balancing accountability and efficiency in a more competitive public sector environment, speech Viewed 11 June 2010, http://www.anao.gov.au/uploads/documents/Balancing_Accountability_and_Efficiency_in_a_More_Competitive_Public_Sector_Environment.pdf ANAO 2009, Introduction: Innovation in the public sector context, better practice guide, viewed 09 June 2010 http://www.anao.gov.au/bpg-innovation/1_introduction.html Mulgan, R. 2003, Holding Power to Account: Accountability in modern democracies, Basingstoke, Hampshire, Palgrave Macmillan. Barrett, P. 2000, ‘Balancing accountability and efficiency in a more competitive public sector environment’, Australian Journal of Public Administration, 59 (3): 58–71. Halligan, J., 2001, ‘Accountability’, in C. Aulich, J. Halligan & S. Nutley, (eds), Australian handbook of Public Sector Management, Crows Nest, NSW: Allen & Unwin, 174–86. Hodges, R 2005, Governance and the Public sector, Edward Elgar Publishing, Cheltenham. Funnel, W. & Cooper, K 1999, Public sector accounting and accountability in Australia, UNSW Press, and Sydney. Braithwaite, V & Levi M 1998, Trust and Governance, Russell Sage Foundation, London. Trimmer, A 2004, Accountability: lessons learnt from the private sector, keeping good companies, Viewed 02 June 2010 http://www.allbusiness.com/management-companies-enterprises/297999-1.html World Bank 2007, Accountability in Governance, Viewed 11 June 2010, http://siteresources.worldbank.org/PUBLICSECTORANDGOVERNANCE/Resources/AccountabilityGovernance.pdf Read More