No accountants in the mainstream

The ORDA world is dominated by economists, and political and social science experts. There are also some technical specialists in agriculture and engineering. But there are almost no accountants that have anything to do with operations.

There are accountants who handle expense reports and travel advances. At the World Bank there are accountants that handle the financing side of the Bank's work. But accountants are not deployed in the analysis of development performance. There is almost nothing that addresses how to do accounting so that there is management information for development.

I used to think that the ethics of professional accountancy would make a difference ... but incidents over a little more than fifteen years suggest that the ethics of the professional accountant are as compromised as almost every other group.

The system of analysis I learned in accountancy is very powerful, and when used in an independent and objective way is a great foundation of decision making and solving problems.

Weakness in accounting

I have always been struck by the weakness of accounting and management oversight in development. It is difficult to understand how the World Bank and the other donor organizations allowed accounting to become one of the weak links in development. My view of the problem in the 1980s was quite simple. At the time I wrote:

I have concluded that it was essentially a “racist” thing. How can we (whites) in the NORTH possibly ask these ignorant (black) natives in the SOUTH to do good accounting?

But later on I realised that the issue was partly this but also even more serious and deeply ingrained in the ORDA culture. In another situation I wrote:

Or it might be because the World Bank and the donor community never had any good accountants on their staff and in their leadership. They never understood the value of good accounting, and just ignored it.

The real reason that accounting is so bad is probably both of these. But it may also be more sinister. I am horrified that accounting is one of the failures in development, when it could so easily have been one of the great successes of development. But the advantage of weak accounting is that huge amounts of money have been able to be diverted to all sorts of personal benefit, at the expense of development performance.

Every accountant knows that without transparency and accountability there will be problems. So the question of how ORDA funds disappear is not difficult to answer. ORDA funds disappear very easily, because there is a terrible lack of accounting, transparency and accountability throughout the ORDA community.

When from time to time some information suggests that there is a problem, it is rare for there to be suitable and visible accountability. The whole culture of accountability, with people taking real responsibility for decision making and the outcomes is virtually non-existant.

I made a proposal to the Administrator's Office in UNDP on “Responsibility Accounting” for management in development early in the 1990s. After the presentation I was advised by a friend that UNDP saw no need and had no understanding of the key words that I had been using throughout my presentation ... analytical accounting, responsibility, management, performance, etc. Sad. But I should have known.

How can huge amounts of funds disappear? Very easily when the accounting system is as deficient as it is throughout the ORDA community. The system in place would work quite well for a small, simple organization where the culture of ethical behavior was to a high standard. But the ORDA institutions are huge, are complex, are spread around the world, and the internal culture is complicated by multiple nationalities, backgrounds and professional agendas. Missing funds is no surprise. The system supports losing funds.

More than anything else, the ORDA world is driven by the correctness of individual transactions, a system that is common in government organizations and has transferred naturally to the ORDA world. What this means is that each individual voucher gets approved, but the totality of the vouchers can end up being quite dramatically wrong and nobody pays much attention. It also means that properly authorized wrong vouchers can go through the system and create inappropriate fund flows.

How can so much bad accounting take place and not cause much concern? The ORDA world does not have very much expertise in accounting and analysis. In fact it is almost better to say simply that the ORDA community has none.

UNDP is a good example. Budgets are prepared for a project. After many meetings, a project budget is approved based on a justification for objectives and activities and outcomes. When the project has been funded and implementation is complete the system used to be for the budget to be adjusted to reflect actual disbursements. It was also common for a project revision to be processed so that the projects objectives, activities and outcomes would be the same as what was actually accomplished. In this process projects were always perfectly performed. The ridiculousness of this process is obvious to any reasonably professional accountant or manager, but was the accepted way of doing things at UNDP for years.

It really is no wonder that funds are badly used, and funds cannot be found.