Tenet of good governance

Tenet of good governance

A primary tenet of good governance is that of a professional public service in which its leadership exercises its powers and responsibilities effectively and ethically and is held to account when transgressions occur.

The accountability gap in the existing enforcement mechanisms demonstrates the need for a public-sector regulator which has sufficient flexibility to carry out an enforcement function by way of a range of enforcement options in order that the seriousness of the offence and best way to address a contravention is taken into account.

To perform its role effectively, such a regulator needs strong and comprehensive enforcement powers that promote an efficient regulatory system for the public sector.

Persuasion, education and encouraging compliance through negotiation, settlement and adverse publicity should be the primary enforcement mechanisms. Prosecution resulting in civil or criminal penalties should be a last resort.

Indeed, in recognising the importance of encouraging a culture of self-correction, as a means of strengthening the current compliance framework, a requirement to publish the results of agency compliance reporting could be introduced.

Such reporting should focus on documenting remedial efforts promoting a rectification approach rather than a punitive one.
While it is critical that agencies take appropriate action, either administrative or criminal, the focus should be on improving financial management and ensuring that, where compliance breaches occur, they are disclosed along with the steps taken to address the issue. Such a mechanism would assist to encourage compliance.

Finance recognises that the concept of a regulatory body established to ensure compliance with financial obligations has two aspects. Firstly, how agencies such as the Prime Minister and Cabinet and Finance can compel agencies in relation to the directive responsibilities of the agencies and secondly, whether an alternative or in addition, an independent body could have the ability to impose administrative penalties and regulate agency behaviour.

Finance itself could be explicitly recognised as a regulator as well as a central policy agency. A ‘regulator’ unit could be established within Finance itself. This approach would acknowledge that Finance can legitimately follow up on agency compliance issues and strengthen the current compliance regime rather than produce a new and external structure.

Further consideration should be given to the enforcement powers aspect of such an approach and particularly to the question of self-regulation.

A regulator unit in Finance would have the benefit of consolidating all the compliance related areas of Finance into a single area. The regulator unit would be responsible for the development of compliance policy, management of the Compliance Certificate and related processes.

While there are clear benefits in consolidating all compliance responsibilities into a single unit within an existing agency, the ability of such a unit to act impartially and independently in instances where Finance itself is non-compliant would have to be clearly demonstrated. There is the danger of Finance being judge, jury and executioner in instances where its own finance directives are the issue.

In a similar vein, if a public sector regulatory function were to be established, mechanisms would need to be established to ensure impartiality and independence.

In establishing a penalty regime for a public service regulator, consideration should be given to the existing powers and penalties applied by the Ombudsman, High State Audit, Financial Inspectorate and views of government agencies including ILDKPKI in allocating appropriate penalties for the public sector.

The Budget is structured around outcomes and outputs. Money is spent on outcomes while outputs and programs sit under the outcomes. Ministers approve their own outcomes. Some outcomes are so broad and general as to be virtually meaningless for Budget accounting purposes leading taxpayers to only guess what billions of their dollars are being spent on.

There are a number of areas of budgeting that be made more transparent Special accounts, Standing appropriations, Tax expenditures and the Contingency reserve.

Special accounts grant a right to departments to draw from the Consolidated Revenue Fund. While there are guidelines on the management of such accounts and they are reported there is no consolidated list of such accounts and their balances.

Standing or special appropriations operate under their own legislation and are usually uncapped and entitlement-driven.

Tax expenditures involve granting certain taxpayers, activities or assets more favorable tax treatment than applies to others. They are not subject to the same budget processes or trade-offs as expenditure programs. Once in, tax expenditures are hard to change or remove.

Equity implications of tax expenditures flowing to high income earners are rarely assessed (35 percent of households don’t have access to tax expenditures because they don’t pay tax).

The Government must be judged by results.

If you want high standards, accountability and good governance, you cannot rely on particular individuals in a particular role at a particular time you have to institutionalize and legislate those standards, so they are there whoever is in charge. Policy fashions and people come and go, but you want good government whoever is in power.

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