Accounting Harmonization: the backbone of transparency

Accounting Harmonization: the backbone of transparency

Leopoldo Mitre – April 13, 2015

Transparency in accountability and efficient management of public expenditure cannot be achieved only with good intentions, powerful Information Systems and efficient processes are needed. The accounting harmonization can be understood by the public as the backbone of transparency, citizen primary requirement to give a vote of confidence to the government.


accounting-harmonization-the-backbone-of-transparency

This year we will live in Mexico midterm elections through which the citizens’ vote are going to reconfigure the Chamber of Deputies and Senators. For the ruling party this vote becomes the most representative sample of its approval among the population. For example, if people think that the performance of the President and his Cabinet has been good they will likely receive a “vote of confidence” of the people by obtaining a majority in both houses. Otherwise people will give them a “protest vote” and the opposition will win enough to reverse or freeze projects and initiatives that the current government has sought to carry out field. In short, intermediate ratings define the capacity of real action from the government and the country’s fate for the next three years.

Now it seems that this time the ratings may result negative for President Peña Nieto. And is that the Federal Government is going through a crisis of image and credibility: first Ayotzinapa sad events that put into question the governance of the country, then a series of alleged corruption scandals hit the closest circle pines and highlight the need for transparency in public accounts; finally a coming a year of financial crisis because the downturn in oil prices which put in the table some doubts about the recent reforms.

With this scenario, how to get citizens’ “vote of confidence”? According to the writer of these lines, there is only one way for the federal government to quickly show concrete actions to tackle the lack of transparency, ensuring a considerable improvement in the efficiency of public spending and attend the poverty issues that have generated the recent social problems. Three very complex lines that may require multiple actions and involve a huge amount of resources; however the Government has the solution that can address these problems with a single effort: Governmental Accounting Policy’s Act (GAP).

Surely many will wonder how is that a single law, which probably has not heard before, can achieve such ambitious goals so quickly. First, because GAP is not new. It was approved in 2008 and initially established that Federation, states and municipalities, to harmonize their accounting to unify their criteria by 2012. However, this term has been amended three times. Second, citizens could find in GAP the guarantee to ensure that the use of public resources is made transparent, ensuring accountability for adherence to the law. Third, the government could find on the criteria and technology platforms -necessary for carrying out the purpose of accounting harmonization GAP- the way to accomplish highly efficient expenditure management and revenue.

The GAP main purpose is to increase the transparency of information establishing general criteria for the issuance of financial information; facilitate the registration and control of assets, liabilities and equity; and establish mechanisms to assess the efficiency and effectiveness of the application of resources, expenditure management and public debt. In summary, GAP seeks to harmonize the budget classifiers, which will be used by all three levels of government depending on the purpose of the expenditure and programmatic function, automatically integrating the financial year with the business transaction and real-time generation of financial statements.

In turn, public institutions’ challenges -in the three levels of government- to meet the objectives of the GAP are: lack of congruence between accounting information and budget, to have records with cumulative basis, reliable control of inventories (movable and immovable property included), excessive generation of financial reports for integrating public accounts that also have little visibility and transparency. Therefore, to achieve that all government entities -at different levels of government- could operate in a harmonized way, not only in terms of budget, but also in spending execution control on real time, could give the opportunity for the public’s opinion to ensue resources against officials who act against the law. Inclusive could generate preventive and corrective measures.

Have you ever had a problem with an institution because they misspelled your name? Say you’re going to travel and someone misspelled your name on the airplane’s ticket. So, when arriving to the airport you have to go for a help desk employee to fix this. After a long explanation the error is corrected and once again you have the same name in both the system and ID. In short, you return to be the same person. If this happens for a person even for a wrong letter, now imagine what happens when millions of transactions at government level are not recorded in the same way. Harmonizing information means that all transactions arising from the object of public spending are called equal and can be approved in accounting terms.

How many times have we heard that some politician is accused of possible fraud because he finish his term with a debt of millions and anyone know anything about what happened? You do not have to answer. However, the question that angrier citizenship (and also many politicians with good intentions) the most is that these scandals are only known when politicians end their mandates. Why? The reality, beyond lack of interest in transparency, is because in many cases Public Institutions do not have the necessary tools (Information Systems) to track transactions, and no way to report information related to the public finances online and in real time. So, even if they want, they can not do anything about it.

Today, in many cases, if a ruler wants to know the numbers with a detail that allow him to identify opportunities for more efficient use of public resources or to disclose information in behalf of transparency of public accounts; he can’t obtain the information or at least in a reliable way. So people who really want to make improvements are hamstrung by being forced to wait until the multiple human and technical teams get together the information. And when reports of public management reach his desk the containing information usually belongs to the past or future but not to the present. So the officer is forced to make decisions based on budgets or in reports that has outdated information.

Surely there will be those who believe that politics is one thing and another to manage public resources, but both tasks should not be fought. To make the GAP initiative to work- will ensure citizens’ power to monitor the management of resources in the states and municipalities, places where public scrutiny has been materially impossible; not only by the unwillingness to accountability, but by the same lack of reliable information.

Transparency in accountability and efficient management of spending can not be achieved only with good will, robust tools that support public administration are required: powerful Information Systems and efficient processes to achieve harmonization of accounting, budgetary and financial at all levels of government. And the average citizen needs a good reason to give the President a “vote of confidence”. I’m sure the accounting harmonization can be understood by the public as the backbone of transparency and administrative efficiency; both requirements of public opinion.