Accountability and Governance: Persistent Questions, New Challenges

1. Accountability and Governance: Persistent Questions, New Challenges Paul L. Posner George Mason University November 11, 2007

2. Consequences of Accountability Weaknesses • Rampant corruption • Fiscal windfalls to principals and agents • Rent seeking • Undermining rule of law and predictability necessary for investment • Sustaining and widening disparities • Inhibiting capacity to learn and adapt to governmental performance shortfalls • Frustrating greater public involvement in governance

3. Investment Climate Survey (World Bank 2006)

4. Accountability: The Elusive Concept • The Building Blocks of Accountability • Legal compliance • Financial controls and stewardship • Program efficiency • Program effectiveness • Evolution of focus

5. Accountability: Multiple Principals • Organizational • Political – voters, parties, elected representatives • Legal • Auditors and reviewers • Professions

6. Accountability Foundations • Management capacity • Information on finances and performance • Incentives • Internalized public responsibility • Sanctions for violating laws • Inducements • Transparency • Report cards • Freedom of information

7. Accountability Institutions • Checks and balances within governments • Executive-legislative relationships • Independent judiciary • Party system • Strong interest groups, NGO’s • Competitive, free media • Independent audit institutions

8. Congressional Oversight Tools and Strategies • Hearings • Investigations • Support agencies audits/evaluations • Authorizations and reauthorizations • Approval of nominations • Transaction approval/veto • Budget and appropriations • Organization of executive agencies • Executive management reforms • Reports

9. Roles of the GAO • A support agency for the Congress • Reports and testimonies addressed to congressional members and committees • Institutional knowledge • Oversight of executive agencies • Recommendations to agency heads • Rulings on procurements and spending • Public reporting promotes transparency and accountability • Inspectors General

10. Resources of GAO • Independence of Comptroller General reinforced by 15 year term • Organized by 14 substantive teams and 11 field offices • 3200 professional staff in numerous disciplines • Access to data held by executive agencies, contractors, states • Processes reinforce independence and neutrality

11. Accountability Barriers • Traditions of informal rule and governance arrangements • Lack of trust and continuous relationships among the key principals • Weak management capacity • Underdeveloped pluralistic institutions • Absence of professional foundations for rule of law • Wide disparities in economic resources • Low expectations for public services

12. Accountability: Reforming Governmental Institutions • Enhancing the quality of the public service • Improving level of information collected by government officials • Promoting greater transparency in sharing information • Fortifying and creating independent institutions to monitor and check performance • Clarifying goals and rules applying to programs

13. Accountability: The Shift from Government to Governance • Establishing healthy NGO’s and free, open media • Promoting more effective monitoring • Police patrol oversight • Fire alarm oversight • Expanding the range of providers to decentralize service delivery • Relying on private partners to provide resources and deliver services

14. Federal Civilian Employment and Outlays (Fiscal Years 1950 – 2006) Billions of FY 2000 Dollars Thousands of Civilian Employees Note: Executive branch civilian employees excluding postal service. Source: Office of Management and Budget.

15. The True Size of Government(Fiscal Years 1990 - 2005)

16. Shift in Public Management • From program/agency to tools and actors • From hierarchies to networks • From public vs. private to partnerships • From command/control to negotiation • From management skills to “enablement” • From internal controls to design

17. Government Non-Government Agency Partnerships Actors State/Local Contractors Federal Contractors Private Individuals... Gov’t Corporations Management Exec Agencies State & Locals Non-Profits Faith-Based GSEs For Profits Foreign Tools Performance Mgmt Direct Services Human Capital Grants-in-Aid Leases Spend Procurement & Contracts Budgeting Transfer Payments to Individuals Government Credit & Insurance Financial Mgmt Corrective Taxes & Fees IT Mgmt Tax Expenditures Revenues Acquisitions Mgmt User Fees & Charges Vouchers Social & Economic Regulation Regulate Permit Trading Information, Training & Advise

18. EPA TREAS DOI DOE DOT HHS DOJ Unified Neighborhood Planning Rebuilding Involves Networking Among Sectors: Government Stakeholders in Louisiana FEDERAL HUD USDA DOC DOD VA SBA DHS Office of the Federal Coordinator for Gulf Coast Rebuilding Louisiana Governor 22 Executive Departments Boards/ Commissions Councils/ Programs Louisiana Recovery Authority STATE 13 Task Forces/ Recovery teams 64 Parish Governments Louisiana Speaks LOCAL 19 affected parishes Orleans

19. State and Local Fragmentation

20. Unique Accountability Challenges • Accountability to multiple constituencies • Multiple actors empowered to bargain • Third parties enjoy leverage • Political resources • Voluntary participation • Monopolies over beneficiaries • Information asymmetries • Complex implementation chains

21. Privatization Pressures • Supplant monopolies with competition • Increase financing for public initiatives • Improve technical capacity • Promote greater flexibility

22. Public-Private Roles and Tools

23. Continuum of Indirect Governance Tools Market based regulatory approaches Internal Managerial Reforms Tax credits and vouchers Quasi- Governmental organizations Public-Private Partnerships Divestiture Contracting for specific Services/ products Devolution Fully Private Traditional Direct Government

24. Case Study: Australia

25. Outsourcing

26. Benefits from Outsourcing • Savings considerable when using competition • Economies of scale • Expanded access to expertise and technology • Improved public sector performance when public service competes with private firms

27. B = Build D = Design F = Finance L = Lease M = Maintain O = Operate P = Purchase T = Transfer DB – contracts with public for design and construction FDBOM – private role in all phases BOT – private transfer to public PMO – sale from public to private LDO – private lease of public facilities LO/LPO – public lease/public lease-purchase Public Private Partnerships for Assets

28. Public-Private Partnerships • Classic PPP – Design, build, operate and maintain over many years • Different from traditional outsourcing • Long term nature of contract • Private responsibility for multiple phases • Relationship between public and private collaborative, not arms length • Competition limited due to large up front capital necessary • Budgetary treatment annualized rather than up front

29. PPP’s: Rewards and Risks • Private Sector Brings Capabilities • Financing • Capitalize underutilized assets • Technical expertise • Market efficiencies • Transfer of demand and supply risk to private sector • Risks from Private Participation • Public values and support • Budgetary control and loss of revenue streams • Contingent Liabilities for shifts in market demand, political changes, disasters and other contingencies • Oversight and Accountability • Truncated Competition

30. Requisites for Successful Public-Private Partnerships • Consistent political support • Effective legal frameworks • Competent government negotiations of terms and conditions • Competition among potential partners • Performance based contracts • Explicit risk allocations • Guaranteed revenue stream for private firms • Support from broader publics

31. Privatization Concerns • Lack of competition reduces rationale for private over public • Exclusivity at outset- sole source • Overdependence over time – indispensable • Accountability and principal agent issues • Cost shifting and cherry picking • Inherently governmental functions • Public ensures we get right things done • Private ensures we do them right • Transparency – assigning credit and blame

32. New Dimensions for Accountability • Tool Choice – is contract most appropriate tool for the job? • Design – are contracts designed to shift risk to private or public sector? • Nature of network – how can government choose “principled agents”? • Oversight – can government effectively specify and monitor private performance and resolve problems?