Accounting

Dear Colleagues

A big part of the Tr-Ac-Net agenda is to get accounting sorted out so that it does what it needs to do.

Accounting is not meant to be a system that enables the corporate world, and indeed any organization, including government, to hide behind a set of numbers that are legally right but make no sense and certainly do not portray a "true and fair" view of the financial situation of the organization.

At their core, economics, and accounting are quite simple subjects. But modern law now makes a mockery of accounting principles ... and complex legal constructs aim to defeat the basic gravity of economics. Many will argue that it works, and that there has been the longest period of economic progress in the United States in history over the past two decades. This is a myth and it will be debunked in due course.

I will argue that there has been incompetent accounting in recent times, and corporate leadership that has embraced legal smoke and mirrors accounting with open arms. As someone who became a Chartered Accountant in the UK in 1965, I am appalled at the failure of the accountancy profession around the world to demand better of its members ... but as one of the senior people in the accountancy world told me almost 20 years ago ... accountancy is no longer a profession, it is a business.

One of the changes that is needed in the accountancy world is a change in focus from satisfying the private needs of an organization to satisfying the the broader needs of the society. The title of Certified Public Accountant (CPA) is misleading, because the CPA has little or no role in ensuring that the public is correctly informed about the financial situation and performance of an organization ... merely to report privately according to legal rules.

When the question: "Accountability to whom?" is asked ... there is nothing that requires that it is the "public" that gets the information. The nearest that the public gets is when a member of the public becomes a stockholder in a public company, at which point this stockholder is entitled to a set of information. But the public as a whole is never entitled to much of anything from the world's major economic entities ... and any potential for disaster is efficiently hidden.

There is a lot of work to do to get accounting so that it does the work that needs to be done. Fortunately modern technology can be an enormous help.

Sincerely

Peter Burgess

Progress towards Millennium Development Goals

Dear Colleagues

In some cases there has been very good progress towards the Millennium Development Goals (MDGs) and in some cases not very much at all.

My own take on the MDGs is that they are more public relations than they are substance. They are typical of the modern era of established governance methodologies ... big on what is going to be done, but rather little to ensure that what is actually needed gets done.

In the year 2000, the UN makes committments to do big things by 2015. WOW! But who in the UN system is going to be around in fifteen years to explain anything. After five years a high profile and costly set of consultants reported on progress to date, and in simple terms, reported that progress was generally not very good at all. Progress in places like China and India with huge populations made the progress look better than it might have otherwise ... but in most places the relief and development sector and its leadership had made little or no progress. At the five year mark, the big recommendation was that issues like poverty could be addressed effectively by massive increases in the funding for the relief and development sector.

I respectfully disagree. There are two things that are needed. One is to make use of available resources in the best possible way. There needs to be very much improved accounting for resources, and especially there needs to be metrics about cost effectiveness. If the available money was used in the best possible way ... that is in the most cost effective way ... progress could be significantly accelerated.

When resources are being used well, then it is time to ask for more resources. At the moment the organizations involved in the relief and development sector either do not know much about the activities that are being funded and the results being achieved, or they are totally unwilling to share this information in a way that is useful.

Money is not the only resource that needs to be accounted for. There is also the human resource component. As things stand at the moment the human resource component is for all practical purposes ignored, and, not surprisingly, progress is not sustained. Imagine how much more could be done if local people were effectively mobilized as a resource for progress.

I see a lot wrong with the present system of relief and development assistance, but I do not see analysis of this. Instead I see a lot of thinking about how more money can be mobilized for something that really does not work.

Sincerely

Peter Burgess
The Tr-Ac-Net Organization