Wednesday, May 18, 2011

Public Accountability

Public Accountability is the obligations of public enterprises and agencies (who are entrusted with public resources) to be answerable for fiscal and social responsibilities, to those who have assigned such responsibilities to them.

A difficult problem faced by public enterprises is to reconcile the demands of accountability and autonomy. Autonomy in managing and running the concern is needed to ensure a high degree of efficiency. Without such a freedom to the management in choosing it policies (e.g., wage policy and the like) decision making is delayed, flexibility in management is lost, and efficiency in its diverse aspects cannot be ensured. On the other hand, since public undertakings are (a) using public funds and (b) are meant to work for social good, it is necessary that the independence of the management must be subjected to the accountability constraint. It is necessary to strike a proper balance between autonomy and accountability.

Three major constituents of public enterprise accountability are :
™ Accountability to Parliament
™ Accountability through Audit
™ Accountability in Annual Reports.

Parliamentary control is very important aspect of the performance appraisal of public enterprises in India. Parliamentary control is exercised through a number of ways such as questions, short discussions, the work of Committees on Public Undertakings (CPU), approvals and reporting about investment and loans, public enquiry based on the recommendations of CPU etc.

Auditing (financial efficiency and propriety) is an important instrument of accountability. There are also systems of Supplementary Audit and Social Audit.

Each Audit has its own purpose and justification. However, sometimes too many audit objections may hinder managerial initiative and efficiency and they may come in conflict with the principle of autonomy.

Finally, there is accountability through the system of annual reports. The Bureau of Public Enterprises (BPE) has issued guidelines about the coverage in Annual Reports. Among other aspects, Annual Report must cover a summary of financial results, changes in accounting methods, changes in price policy, important events affecting production and productivity, staff welfare activities etc. In parliamentary democracy these several instruments of public accountability go some way in ensuring that public enterprises serve public need in a responsible manner

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