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Financial Records and the Movement to Strengthen Financial Controls
It is now widely recognized that improvements in the management of government finance are essential to bring a halt to the global escalation of corruption. Yet, unless the records resulting from the conduct of financial management activities are managed effectively, this goal cannot be achieved. Records management, which is the process of managing the creation, maintenance, use and disposal of records throughout their life-cycle, can provide a vital tool in addressing what the World Bank has referred to as the `lack of transparency, spurious accounting practices, and non-compliance with Bank procurement rules'.1 Conditions and contractual obligations set by the Bank, the IMF and aid donors in respect of audit, performance measurement and reporting, all rely upon the quality and effectiveness of financial record-keeping.
Governments create and use financial records within a regulatory, institutional and functional environment. The national constitution often requires regular reporting to the national legislative assembly. Finance and audit laws generally require ministries and departments to ensure that financial and accounting records are adequately kept and managed and to empower the audit body to obtain access to all financial records. Accounting instructions and financial regulations promulgated under these laws set down more detailed conditions and requirements for accounting and financial records. These include the creation, filing, storage, production and disposal of prescribed forms and records. Legislation relating to the broad management of government records and archives encompasses financial records, even though they may not be referred to explicitly.
Other legislation may also affect financial records or specify conditions for their maintenance, use or disposal. For example, pensions legislation imposes an obligation on departments to maintain records of contributions. Revenue laws may indicate a time limit on the recovery of tax or duties, thereby establishing a minimum period for the retention of revenue files.
Non-compliance with legislative requirements relating to financial record-keeping can have significant consequences, which may manifest themselves in various ways, for instance the inability to perform audits, uncertainty about the completeness and accuracy of financial information and the lack of reliable information for economic and fiscal planning.
The Financial Management Cycle
Financial management comprises a series of functions, which may be described in terms of a cycle, although in practice, there...