CHAPTER THREE - REFORMING THE BRETTON WOODS INSTITUTIONAL FRAMEWORK:
FROM ADAPTATION TO ACCOUNTABLE "REINVENTION"

7. ACCOUNTABILITY

This is a longstanding and closely-related theme of reform. In the past, critics have often called for the disclosure of voting records on loans. And in Canada's case, there has been progress given the commitment by our current Executive Director at the World Bank, Len Good, to make public Canada's position upon request after loan negotiations have been completed. Despite the Canadian lead in pushing for openness, there is still much work to be done to improve the general practice. Moreover, in the Committee's view, there are other multiple dimensions of accountability that need to be considered in any comprehensive reform. The first of these is better accountability to democratic parliaments which vote the monies that sustain the operations of the IFIs. The Special Joint Committee Reviewing Canadian Foreign Policy recommended that ministers responsible for the IFIs and Canada's executive directors for them appear annually before Parliament's foreign affairs and finance committees. (We would add to that the need to facilitate joint meetings by the House Committees which have overlapping responsibilities in regard to these issues.) In its response, the government offered to make available "briefings by ministers and officials". Noting that the Minister of Finance already tables several annual reports in Parliament, the response added that the Minister of Foreign Affairs would do the same for the other MDBs. 21 We note also that the Auditor General, in his 1994 Report following up a critical 1992 review of the regional development banks (RDBs), indicated some progress had been made, including better reporting by CIDA. Regarding more accountability by executive directors, Louise Fréchette of the Department of Finance raised a concern that EDs are in fact officers of, and paid by, the IFIs, and that in the case of Canada they also represent some smaller countries within their "constituency" on the executive boards. [16:47-48]

Nevertheless, the Committee is of the view that the present system remains seriously deficient in several respects. For one thing, in terms of accountability, relationships within the organizations themselves, it is not clear to what extent it is the nominal political masters or the staff who really determine policy and operational direction. Noting the World Bank's "strong internal culture [in which] staff know that their promotion prospects usually depend more on their internal reputations than on the opinions of anyone outside the organization", a recent article quotes Willi Wapenhans to the effect that it is operational management not the president and executive board which have been defining corporate strategic direction. 22 Remarks during our Washington meetings by Canadian ED Len Good indicated that loan terms and conditions have generally been fully worked out by staff before coming to the board for approval. Our concern is that this process must be more than a "rubber stamp", since accountability to the member states (i.e. to Canadians as "shareholders" in these institutions) requires that EDs be an effective conduit for influencing IFI policies and decisions. A more complete accountability system must therefore include more than a post-facto disclosure of formal records of decision. It must provide earlier opportunities for input into the processes whereby important decisions are taken. And for this input to be considered seriously requires in turn the timely release of relevant information held by these institutions. The creation of an independent auditor should be considered to assist member countries in their ability to carry out effective public scrutiny of IFI operations and performance.

In a detailed analysis of accountability issues, Culpeper and Clark expose the continuing weaknesses in the complex chain linking the IFIs and taxpaying publics. Observing that there have been no Canadian government reviews of the performance of the Bretton Woods institutions since 1945, they argue that the reporting which currently takes place (viz. the Report on Operations Under the Bretton Woods and Related Agreements Act tabled annually by the Minister of Finance) does little to assist Parliament or the public in grappling with the important policy issues facing the institutions. Instead, they suggest the following remedies:

It would be highly valuable to put the Executive Director's annual reports in the public domain in order to make available to parliamentarians and others the insights about the Banks and detailed information about Canadian activities in the MDBs. ( . . .) Direct reporting on development issues and Canada's role in the MDBs, to members of the Canadian public, should form a much more substantial portion of the duties of Canadian Executive Director and their staff. 23

Another element that deserves mention, is the accountability of the IFIs to those most affected by their activities, or the consequences thereof - in other words, to the "stakeholders" on the receiving end as well as the donor "shareholders". Earlier it was indicated that the World Bank has put in place an inspection panel to review complaints. It has also had in place for some years an "NGO Working Group". However, the NGO witnesses who testified before the Committee all indicated a strong view, shared by many of their partners in developing countries, that the IFIs still have far to go in terms of being responsive to the views of communities, poor people, environmental groups and civil-society organizations generally. In this regard, we see some merit in exploring additional participatory mechanisms - to ensure that projects are truly based on locally-determined needs, or to allow for an independent external appeals process (such as, for example, the possibility of a UN "ombudsman" for the IFIs).

Therefore, the Committee recommends that, given the importance of strengthening the IFIs' accountability both to their shareholders and to all stakeholders, the G-7 Task Force consider reforms specifically in regard to: the accountability structures within the organizations; the relationships of executive directors to national elected bodies; the requirements of parliaments for sufficient and timely information and for independent audits on which to base effective oversight of IFI operations; the need for stronger consultative and independent appeal mechanisms for those most affected by IFI decisions and activities.