Applying COSO principles in the public sector for good governance: A Bangladesh perspective

Good governance is a key pillar of sustainable development, especially for developing nations like Bangladesh. In recent years, the Government of Bangladesh has undertaken significant reforms to strengthen transparency, accountability, and service delivery across public institutions.

To further this progress, adopting global frameworks like the COSO (Committee of Sponsoring Organizations of the Treadway Commission) Internal Control – Integrated Framework can play a transformative role in reinforcing internal controls and promoting good governance in the public sector.

This article discusses how the COSO framework can be effectively applied within Bangladesh's public sector institutions to enhance governance, improve service delivery, and reduce corruption.

Understanding the COSO Framework

The COSO framework consists of five key components and 17 associated principles designed to support internal control systems across organizations. The components are:

1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring Activities

These components provide a structured approach to achieving operational efficiency, ensuring compliance with laws and regulations, and safeguarding public resources.

Application of COSO Principles in Bangladesh's Public Sector

1. Strengthening the Control Environment

In Bangladesh, the control environment in government institutions is influenced by bureaucratic culture, political will, and leadership commitment. Implementing COSO involves:

• Enforcing ethical values and integrity in public administration through a strict Code of Conduct and whistleblower protection laws.
• Empowering oversight bodies like the Office of the Comptroller and Auditor General (CAG) and Anti-Corruption Commission (ACC).
• Establishing and training internal audit functions in Ministries, Divisions and Agencies (MDA) under the guidance of Finance Division and SPFMS Program.

2. Institutionalizing Risk Assessment

Bangladesh's public sector faces multiple risks—financial mismanagement, weak procurement practices, and delays in development projects. COSO-based risk assessment would:

• Require public agencies to identify, assess, and respond to risks related to policy, finance, and project execution.
• Promote a risk-based internal audit (RBIA) approach in collaboration with entities like the Internal Audit Wing (IAW) of the Finance Division as well as Internal Audit Unit (IAUs) of other agencies.
• Link risk identification to the achievement of MDA objectives as well as Vision 2041, SDGs, and other strategic plans.

3. Enhancing Control Activities

To combat inefficiencies and irregularities, control activities must be integrated into daily operations. In the Bangladesh context:

• Segregation of duties in sensitive areas like public procurement, tax collection, and social safety net programs is vital.
• Adoption of digital financial management systems (like iBAS++, e-GP, and e-Tendering) can automate controls and minimize human errors or manipulation. Link department wise systems to iBAS++ and e-GP is also vital. 
• Ensuring cybersecurity and protection of digital assets from unauthorized actors is also crucial for accountability and transparency. 
• Standard Operating Procedures (SOPs) should be institutionalized in all ministries and departments for consistency and accountability.
• Utilizing the government budget from the very start of the financial year rather than waiting for year-end reallocation is a critical success factor for utilizing heard earned public fuds appropriately and as per Annual Procurement Plan (APP)

4. Improving Information and Communication

A major challenge in the Bangladeshi public sector is the lack of timely and accurate data. To implement COSO effectively:

• Ensure clear and two-way communication within ministries and between central and local government entities.
• Leverage Integrated Information Systems like D-Nothi, MIS, and Digital Dashboard for better governance.
• Improve public access to information via the Right to Information Act (RTI), enhancing transparency and civic engagement.

5. Strengthening Monitoring Activities

For sustained governance improvement, continuous monitoring is essential. COSO recommends:

• Regular internal audits, inspections, and performance reviews using tools like the Annual Performance Agreement (APA) and Citizen's Charter.
• Institutionalizing Management Responses to audit observations raised by CAG and internal auditors.
• Leveraging digital audit tools and performance metrics to ensure timely correction of deficiencies and learning.

Overall Benefits of COSO in the Context of Bangladesh

• Improved Governance Culture: Builds a culture of accountability and ethical conduct among public officials.
• Enhanced Service Delivery: Promotes effective utilization of public funds and better outcomes in health, education, and infrastructure.
• Corruption Reduction: With robust internal controls and oversight, avenues for financial misconduct are minimized.
• Increased Donor Confidence: Strengthened governance mechanisms align with development partner expectations and increase funding confidence.
• Support for Vision 2041 and SDGs: Strong internal control systems accelerate the achievement of national development goals.

Challenges in Implementation

While the COSO model offers a strategic framework, its implementation in Bangladesh's public sector faces several challenges:

• Capacity Constraints: Lack of trained internal auditors and control professionals.
• Resistance to Change: Traditional bureaucratic practices may hinder reform.
• Coordination Gaps: Weak coordination between finance, planning, and implementing agencies.
• Limited Automation: Despite progress, not all agencies are fully digitized.

Way Forward

To institutionalize COSO principles, the Government of Bangladesh can take the following steps:

• Launch capacity-building initiatives through Bangladesh Public Administration Training Center (BPATC), Financial Management Training Academy (FIMA), Institute of Public Finance (IPF) etc. and focused on internal control and risk management.
• Ensure mandatory internal audit functions in all large spending ministries.
• Create a COSO Implementation Framework tailored to public sector operations.
• Develop performance-based incentive systems for improved compliance and accountability.

Conclusion

Applying the COSO internal control framework in the public sector can significantly enhance governance in Bangladesh. It provides a structured approach to managing risks, strengthening controls, and promoting transparency. As Bangladesh moves toward becoming a developing nation and achieving its long-term goals, integrating COSO principles into public financial management and administrative practices can be a cornerstone for sustainable and ethical governance.

Mohammed Iqbal Hossain is Former Controller General Defence Finance and Senior Consultant, Internal Audit, Finance Division of the Government of Bangladesh.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.