The control pyramid: A model of integrated public financial control

• Published date: 01 February 2020
• Date: 01 February 2020
• Author: Antonio‐Martín Porras‐Gómez
• DOI: http://doi.org/10.1111/faam.12221

Received: 31 December 2018 Revised: 5 June 2019 Accepted: 22 July 2019

DOI: 10.1111/faam.12221

ORIGINAL ARTICLE

The control pyramid: A model of integrated public

financial control

Antonio-Martín Porras-Gómez

Centro de Estudios Políticos y Constitucionales,

Madrid, Spain

Correspondence

Antonio-MartínPorras-Gómez, Centro de Estu-

diosPolíticos y Constitucionales, Plaza de la

MarinaEspañola, 9, 28013 Madrid, Spain.

Email:antoniomartinporras@hotmail.com

Abstract

This article offers an original analytical scheme to study the institu-

tional morphology of the financial control function in constitutional

democracies, comprehensively integrating five control subsystems:

internal, external, jurisdictional, political, and social. First of all we

aim to answer a formal question: To what extent does a hierarchi-

cal and stratified architecture properly structure the financial con-

trol systems in constitutional democracies? Second, we address two

design questions: How can we improve financial control by building

upon the interconnections among the different control subsystems?

And, what kind of dysfunctionalities might appear if the hierarchi-

cally stratified design of the control pyramid is not respected? The

approach is predominantly legal-institutionalist, exploring transna-

tional control standards (with a particular focus on the European

Union) and their translation into national control systems. The study

is supported by an extensive literature review and a series of inter-

views with practitioners.

KEYWORDS

external control, financial control, integrated control, internal con-

trol, public audit, supreme audit institution

1INTRODUCTION

The study of the financial control function in the public sector has been characterized by partial approaches that have

excessively restricted the empirical scope of study.Epistemic communities of accountants, controllers, and auditors

have narrowly focused on specific control subsystems,1with the literature over-reliant on institutional descriptions

rather than theoretical foundations (Heald, 2018, p. 1). This has led to a serious lack of a synthetic model bringing

together the efforts of all the actors that, according to the institutional architecture prevailingin constitutional democ-

racies, are supposed to be involvedin the control of the governmental function. This constitutes a deficit that needs to

be filled by the academic literature, because the excessiveconcentration on single financial control levels can lead to

the sub-optimization of the overallsystem.

Financial Acc & Man. 2020;36:73–89. wileyonlinelibrary.com/journal/faam c

2019 John Wiley & Sons Ltd 73

74 PORRAS-GÓMEZ

Toadvance in the development of a comprehensive model of integrated control, this article offers a categorization

of the public financial control system consisting of five control subsystems (internal, external, jurisdictional, political,

and social). The selection of these five subsystems is determined by a legal-institutionalist perspective that identifies

the actors involvedin the financial control function in constitutional democracies.

The institutional morphology of financial control is geometrically idealized as a two-dimensional pyramid. By name,

it is the financial control pyramid. The control pyramid constitutes a novel approach, representing an improvement

with respect to the fragmentary views that have prevailed until now in the relevant epistemic communities. Its

configuration, with the progressive built up of reliance across control levels, the cascading compliance pressure, the

subordination of the subsystems situated in the levels below, and interconnection among control subsystems are

henceforth explained. On the basis of these formal propositions, we highlight the need to build upon the interconnec-

tions between the different controls subsystems. This constitutes our design proposition P1. Second, we sustain that

dysfunctionalities might appear if the hierarchically stratified structure of the control pyramid is not respected. This

constitutes our design proposition P2. To back our design propositions, we offer a range of explanatoryarguments

grounded on the literature (with an examination of more than 70 articles spanning the last five decades) and on our

own empirical research.

The conceptual model of the control pyramid provides an analytical scheme with the potential of enabling scholars

and practitioners to engage in more sound policy discussions (and problem solving) about public financial control. We

will show how the partial perspectives prevalent so far have led to inefficiencies, which can be better addressed with

a comprehensive control design with the potential of directing the attention to the interconnections among control

subsystems. The approach being legal-institutionalist, the main source for the analysis is the systematic assessment

of written material: INTOSAI (International Organisation of Supreme Audit Institutions) documents and the enabling

legislation of internal control bodies and Supreme Audit Institutions (SAIs), supplemented by the analysis of semi-

structured interviews with internal, external, and political controllers.

Thearticle is structured as follows: first, we define and delineate the contours of all the financial control subsystems.

Second, we offer an integrated perspective and draw design propositions from it. Finally,we conclude by highlighting

the importance of our propositions and pointing toward possibilities for future research.

2THE CONTROL PYRAMID

The public financial control system is built as a whole around a pyramidalstructure (Figure 1) in which different layers,

responding to diverse political and legal rationales, canbe distinguished: internal, external, jurisdictional, political, and

social. Each level rests directly on the level below, and indirectly upon the remaining lower levels. The jurisdictional

control only intervenes in cases of suspected illegalities; hence it is represented as a minor level.

2.1 Internal control

Internal control is carried out from within the Executive power itself.It is the control done by public administrators in

their everyday job, as well as the control exercisedby specific internal controllers and internal auditors (such as the

Internal Audit Service in the European Commission), either directly or through outsourced personnel. Internal control

operates an activity of transparency that allows senior civil servants and politicians to know whether the legal and

political objectives are being properly followed. On the basis of this transparency,accountability processes might be

substantiated within the public administration itself,by virtue of which officials could be held to account, with possible

disciplinary consequences imposed.

2.2 External control

The external control subsystem is composed of specialized independent entities (Lima Declaration, sections 5–7) that

control public administration following audit standards. These entities can be labeled as SAIs (supreme in their own