A logical start of the accountability function

For years, the field of financial accountability, internal management, internal control and compliance has remained relatively stable. Due to an increasingly rapidly changing world with major social challenges, infinite technological possibilities and a critical citizen, the board and senior management are looking for a way to translate this smartly into the management and accountability function of the organization. Available techniques such as agile working, data analysis, GRC software and continuous monitoring are taking off. In addition, information security and privacy legislation have a significant influence.

Een logisch begin van de verantwoordingsfunctie

In a series of 6 blogs, Edwin Lodder discusses the latest developments in this area at large ministries and the government. A new dynamic seems to be emerging. Ministries and other government organizations are faced with the task of modernizing their accountability function. Based on a tour of the fields, the six most important developments are listed.

Financial accountability or internal control?

In part 1 I start at the beginning and we will discuss the differences. If they exist at all. Current developments such as those described above mean that a new balance must be sought between integrality, transparency, ownership, communication structures and use of technological possibilities. Old and trusted methods such as “waterfall projects”, hard controls, manual checks, Excel islands and hierarchy are no longer up to date. It creaks and groans. That is why effective financial accountability and internal control within ministries and government are so important now and require modernization

Why are the subjects of financial accountability and internal control often treated as two different subjects? I dare to say that these are two sides of the same coin. They must be tackled together, as an integral function. In relation to internal control, you quickly think of process management, quality management, but also compliance with, for example, the BIO standards framework or GDPR legislation. Financial accountability is often understood to mean the old annual accounts or internal financial statements. Financial accountability is mainly seen as a celebration of finances. Thinking from left to right. In other words, from figures by means of a balance sheet item, via a data-oriented accountability reasoned back to the business process within an organization.

The term internal control is already thought more from the business operations perspective. It concerns set goals, including financial reliability, but also, for example, efficiency, legitimacy, customer focus and delivery reliability. Topics such as information security and privacy occupy an important place within the internal control of an organization. The internal control function is business operations and process-oriented. And therefore from right to left. From the process and the goals, via a process-oriented accountability reasoned back to the balance sheet (balance sheet item).

Difference in starting point

Financial accountability and internal control are two sides of the same coin, but have a completely different starting point. In my opinion, there is no difference between financial accountability and internal control. The chosen term does determine the angle, communication, working method and approach within the organization. When you think of financial accountability, you primarily think of figures. Within the central government, people are talking less and less about figures and more about the organization being In Control with regard to its objectives. The starting point is increasingly: Is my organization In Control and are the business processes also In Control? The focus from the internal control concept is gaining ground. In this respect, process management is an important part of a modern internal control strategy. Process control is increasingly being viewed from an In Control Statement concept. A trend that I will discuss in the next blog.

In short

A modern financial accountability function is practically synonymous with an internal control approach. It is thought from right to left. From the process, via process control and a process-oriented accountability to the figures (the balance sheet item). Steering towards being In Control of the business processes and accounting for this. If your organization still mainly manages financial reports, interim reports, link checks, data-oriented checks and balance sheet items from the financial accountability, there is nothing wrong. There is still a fair way to go towards a modern financial accountability, an internal control function. But I will help with this in the following blogs!