Accountability for public expenditure in Bangladesh: the principal-agent problem and role of the Office of the Comptroller and Auditor General

Abstract

While administrative accountability is a key to good governance, there is a dilemma concerning which aspects of it should be given special emphasis. This dilemma arises in part from the alternative perspectives of bureaucratic management and principal-agent theory. The former provides for accountability through hierarchical control, written rules and procedures, and bureaucratic impersonality. The latter, by contrast, heralds the value of contractual relationships and the resulting incentives that lead actors to respond in particular ways. This article addresses these perspectives with reference to the public expenditure accountability system in Bangladesh as a principal-agent problem between the executive, bureaucracy and the parliament. A significant element of the problem is that the Office of the Comptroller and Auditor General has limited capacity to enhance the flow of credible public financial information as a means of reducing the information asymmetry between principals and agents.