After the Rain : how the West lost the East

by Samuel Vaknin

Procurement policies, procedures and tenders are supervised by state auditing authorities. The most famous is, probably, the General Accounting Office, known by its acronym: the GAO.

It is an unrelenting, very thorough and dangerous watchdog of the administration. It is considered to be highly effective in reducing procurement – related irregularities and crimes. Another such institution is the Israeli State Reviser. What is common to both these organs of the state is that they have very broad authority. They possess (by law) judicial and criminal prosecution powers and they exercise it without any hesitation. They have the legal obligation to review the operations and financial transactions of all the other organs of the executive branch. Their teams select, each year, the organs to be reviewed and audited. They collect all pertinent documents and correspondence. They cross the information that they receive from elsewhere. They ask very embarrassing questions and they do it under the threat of perjury prosecutions. They summon witnesses and they publish damning reports, which, in many cases, lead to criminal prosecutions.

Another form of review of public procurement is through powers granted to the legislative arm of the state (Congress, Parliament, Bundestag, or Knesset). In almost every country in the world, the elected body has its own procurement oversight committee. It supervises the expenditures of the executive branch and makes sure that they conform to the budget. The difference between such supervisory, parliamentary, bodies and their executive branch counterparts – is that they feel free to criticize public procurement not only in the context of its adherence to budget constraints or its cleanliness – but also in a political context. In other words, these committees do not limit themselves to asking HOW – but also engage in asking WHY. Why this specific expense in this given time and location – and not that expense, somewhere else or some other time. These elected bodies feel at liberty – and often do – intervene in the very decision making process and in the order of priorities. They have the propensity to alter both quite often.

The most famous such committee is, arguably, the Congressional Budget Office (CBO). It is famous because it is non-partisan and technocratic in nature. It is really made of experts, which staff its offices.

Its apparent – and real – neutrality makes its judgements and recommendations a commandment not to be avoided and, almost universally, to be obeyed. The CBO operates for and on behalf of the American Congress and is, really, the research arm of that venerable parliament. In parallel, the executive part of the American system – the Administration – has its own guard against waste and worse: the Office of Management and Budget (OMB).

Both bodies produce learned, thickset, analyses, reports, criticism, opinions and recommendations. Despite quite a prodigious annual output of verbiage – they are so highly regarded, that virtually anything that they say (or write) is minutely analysed and implemented to the last letter with an air of awe.

Only a few other parliaments have committees that carry such weight. The Israeli Knesset has the extremely powerful Finance Committee, which is in charge of all matters financial, from appropriations to procurement. Another parliament renowned for its tight scrutiny is the French Parliament – though it retains very few real powers.

But not all countries chose the option of legislative supervision. Some of them relegated parts or all of these functions to the executive arm.

In Japan, the Ministry of Finance still scrutinizes (and has to authorize) the smallest expense, using an army of clerks. These clerks became so powerful that they have the theoretical potential to secure and extort benefits stemming from the very position that they hold. Many of them suspiciously join companies and organizations, which they supervised or to which they awarded contracts – immediately after they leave their previous, government positions. The Ministry of Finance is subject to a major reform in the reform-bent government of Prime Minister Hashimoto. The Japanese establishment finally realized that too much supervision, control, auditing and prosecution powers might be a Pyrrhic victory: it might encourage corruption – rather than discourage it.

Britain opted to keep the discretion to use public funds and the clout that comes with it in the hands of the political level. This is a lot like the relationship between the butter and the cat left to guard it. Still, this idiosyncratic British arrangement works surprisingly well. All public procurement and expenditure items are approved by the EDX Committee of the British Cabinet (=inner, influential, circle of government), which is headed by the Ministry of Finance. Even this did not prove enough to restrain the appetites of Ministers, especially as quid pro quo deals quickly developed. So, now the word is that the new Labour Prime Minister will chair it – enabling him to exert his personal authority on matters of public money.