| Written by Mark Funkhouser,
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I recently heard Dick Johnson, the State Auditor for Iowa, talk about a trip that he had made as part of a delegation from the National Association of State Auditors, Comptrollers, and Treasurers. They had gone to Bosnia-Herzegovina to assess the systems of government accounting and auditing in place and to offer advice on how these could be rebuilt. Think about this. A country devastated by several years of bitter warfare and among the first orders of business is to re-establish government auditing and accounting systems. This is not what most of us would think of – what about infrastructure: roads, bridges, and utilities, what about schools, hospitals and other public buildings? Obviously an enormous amount of work needs to be done of this type. (In fact, Dick told us that the building he stayed in was without heat and they only had electricity a few hours a day.)
When I asked Dick about this seeming incongruity, he had an answer that seemed obvious after I heard it. Agencies like the U. S. Agency for International Development and the International Monetary Fund will not make the loans and grants needed if there are not accounting and auditing systems in place to provide some assurance that the money is used for the intended purposes and not lost through waste and corruption. Private investment is also unlikely to happen if basic institutional structures, including accounting and auditing systems are not in place. There has to be a legal structure that allows for enforcement of contracts. There have to be agreed upon definitions of accounting terms. And behind all this there has to be political legitimacy. If these conditions cannot be met, then there can be no market economy and no democratic government.
I think the time has come in America when we take this all for granted. Political legitimacy and stable government institutions have been ours for so long that many of us have become blind to their necessity and purpose. As one item of evidence, I offer the following:
The Wall Street Journal runs a column on the front page called the "Business Bulletin" and the last item in this regular feature is a short piece entitled "Briefs" that includes odd bits of trivia and quotes. The March 26, 1997 issue carried the following in that little section: "…All taxes are a drag on economic growth, it's only a question of degree." The quote was attributed to Alan Greenspan, Chairman of the Federal Reserve Board.
Perhaps, Mr. Greenspan was quoted out of context. I hope so. For, as Dick Johnson's experience in Bosnia shows, without government, and of course the taxes to support government, there is no economy. Today, many would put the economy first, but in fact the government comes first. Without some basic institutional and legal structure, established through political processes and operated by professionals and technicians (including accountants and auditors) there will be no market. The fact of the matter is that government accounting and auditing (and central banks) are basic to democratic government. So…my brothers and sisters of the spear, my colleagues in government auditing, sit a little taller at that computer. The work you do is important and in fact neither Alan Greenspan nor the big business people downtown could begin to do what they do without you.
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Funkhouser on Auditing