"Proper Trust of Liberty": economical reform, the English constitution and the protections of accounting during the American War of Independence, The

Accounting History,  Feb 2008  by Funnell, Warwick

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Ultimately in the case of military accounts it took the political, financial and constitutional perils arising out of four years of war with the Americans to finally convince many prominent members of His Majesty's Opposition that any protections for liberty that government accounts for military expenditures might provide had been substantially dissipated by the poor quality of military accounts15 Annual appropriations and accounts for the military, a major achievement of the settlement that followed the English Revolution, allowed parhament as the sole legal paymaster of the army to determine the funds that left the Exchequer,16 and which then passed into the hands of the executive. However, this provided only a very partial and deceptive constitutional protection, even though the Revolution had brought the army under parliamentary control. Immediately after the revolution, parliament had not appreciated sufficiently that the audit carried out on these accounts did not examine the actual expenditure by the army and navy. Rather, it was an audit of the imprests made from the Exchequer to the departments administering the army and navy (see especially 25 Geo.III. c.52, section XVII). Parliament had no information as to whether these imprests were fully expended and whether they had been used for the purposes approved by parliament. All that parliament knew from the annual audit reports of military expenditures was that issues from the Exchequer to the military departments had not exceeded the total amounts authorized by parliament. Even these faulty protections available for military expenditures were not available for civil list expenditures for, as noted earlier, the accounts of civil list expenditures were neither available on a regular basis nor could parhament compel their production other than when the Crown sought funding beyond the set annual appropriation by parliament. The ignorance of parliament was compounded by the impotence of the Exchequer in enforcing regular and timely accounting for money distributed to officers on the civil list, but especially sinecurists whose accounts were often many years in anears

Many government officials, civil and military, acting as bankers for the government received often very large amounts of money to make payments on behalf of the government (Parliamentary History, Vol.XIX, 22 March 1778, cols 977-8). From these monies they would take the payments due to them for their services and return to government any unused funds after their accounts had been audited and accepted by the Exchequer's auditors on behalf of the Crown and not parliament. Following an ancient statute of Henry III (1207-72) (51 Hen. Ill, c.5) accounts could not be submitted for acquittance, that is final settlement, until officials who had previously held the same position had their accounts settled and received their quietus (acquittance) ("Fourth Report of the Commissioners for Examining the Public Accounts", Journals of the House of Commons, 6-9 April 1781, col. 382). Any delay in the settlement of these earlier accounts delayed all subsequent finalization of accounts, to the great financial advantage of many office holders Indeed, there was no incentive to encourage the prompt settlement of accounts or the return of unspent funds. Rather, while ever agents and officers acting as bankers on behalf of the government were entitled to retain any interest that accrued on funds remaining with them there was a significant incentive to avoid the early return of funds or to change the system. According to Burke, who was acknowledged as unusually expert in understanding the complexities of the system of accounting, it was in the interests of these "bankers" to unnecessarily complicate and "distract" the public accounts to delay settlement (see Burke's comments on 11 February 1780 cited in Elofson and Woods, 1996, p.497).