The Role of Public Sector Accounting in Monitoring Foreign Aids and Its Effectiveness: A Systematic Literature Review ()
1. Introduction
More than $200 billion in development aid is distributed globally each year, but much of it disappears in bureaucratic inefficiency, corruption, or bad management (OECD, 2022). This raises an important question: who makes sure that foreign aid reaches its intended beneficiaries and is used effectively? Foreign aid makes up a significant portion of public expenditure in many developing countries, and its management is a matter of national and international concern. Despite the good intentions behind aid, there is growing skepticism about its actual impact on development outcomes, especially in weak governance systems (Moyo, 2009).
Enhancing the public accounting system is not just a technical solution, but a fundamental strategy for improving the effectiveness of assistance and promoting sustainable development. The challenge is not only in the amount of assistance but also in the transparency and accountability of how it is managed. Public accounting, as a system for recording, monitoring, and evaluating public financial activities, plays a key role in ensuring that foreign aid is used efficiently and in accordance with development objectives. The study of this interrelationship is crucial, because ineffective aid not only wastes valuable resources but also erodes the trust of donors and the social contract between governments and citizens.
Foreign aid has long been a fundamental instrument of international development, especially in low- and middle-income nations. The major aims are to stimulate economic growth, reduce poverty and strengthen institutional capacity. However, because of inadequate monitoring systems, poor governance, and a lack of transparency, the effectiveness of assistance has frequently been questioned (Easterly, 2006). In this regard, public accounting—the method used to record, report, and assess state financial data—is becoming a crucial tool for guaranteeing the prudent and strategic use of aid monies.
Therefore, the strength of public financial management systems and the efficacy of foreign aid are inextricably linked. The fact that institutional quality, especially in the areas of financial supervision, audit, and budget management, is intimately linked to the success of aid, is one of the most significant revelations in the ongoing discussion (OECD, 2019). The framework required to monitor assistance flows, identify misuse, and evaluate success in respect to development objectives is provided by public accounting. This is especially important in nations where a significant amount of the national budget is allocated to aid and where there is little national resource mobilization. Stronger public accounting systems allow recipient nations to show funders and citizens that they are more accountable.
This dynamic is illustrated in several case examples. For instance, the creation of an efficient Auditor General’s Office and enhancements to public financial management in Rwanda have greatly boosted direct budget support and donor confidence (IMF, 2020). However, in the south, rampant abuse of aid was caused by a weak accounting system and a lack of transparency, which decreased donor participation and raised humanitarian concerns (Transparency International, 2022).
These differences show how public accounting frameworks, whether robust or not, can affect the direction and legitimacy of aid initiatives. While some academics contend that foreign aid encourages dependency and sustains inefficiency, others emphasize the significance of institutional reforms and capacity-building to guarantee that aid is used for its intended purpose. This debate over the effectiveness of aid is still ongoing (Moyo, 2009; Sachs, 2015).
Technical advancements in accounting, auditing, and reporting, according to experts, can improve aid by boosting government accountability and transparency. In conclusion, given the state of development today, it is not only pertinent but also crucial to examine the function of public accounting in the oversight of foreign aid. In the end, improved accounting systems can increase the legitimacy, effectiveness, and impact of aid programs by bridging the gap between donor expectations and the realities of the recipient government. Therefore, the study aims to investigate how public accounting procedures might be improved to enhance foreign assistance outcomes and guarantee that development funds are used for their intended purposes.
To guarantee that aid is allocated toward its intended developmental aims, foreign aid should ideally be managed through open, accountable, and thoroughly inspected public financial systems. A key component of tracking the distribution, expenditure, and assessment of foreign aid should be public accounting, which will increase donor trust, reduce abuse, and improve development results (World Bank, 2021).
Nonetheless, inefficient public accounting systems remain a problem in many aid-receiving nations. Frequently, these systems are unable to reliably report on aid utilization, conduct timely audits, or precisely trace aid flows. Because of this, foreign aid is usually mishandled, misdirected, or underutilized, which severely reduces its efficacy and erodes donor commitment and public trust (Transparency International, 2022; OECD, 2019).
Weak institutional frameworks, a shortage of qualified staff, political meddling, a lack of technological infrastructure, and disjointed accounting standards that do not conform to global best practices are the primary obstacles to realizing the ideal (Afrobarometer, 2020). Furthermore, there is frequently a lack of coordination between donors and recipient governments, which results in redundant work and parallel reporting systems that further jeopardize financial accountability (Muwanga et al., 2020).
In many developing nations, public accounting systems have not improved over time despite the introduction of various initiatives, such as donor-imposed reporting frameworks, public financial management reforms, and capacity-building programs (Andrews, 2013). There is little empirical research on how particular public accounting procedures affect assistance monitoring and efficacy; instead, much of the literature now in publication concentrates on macroeconomic effects of aid or general governance improvements. This disparity emphasizes the need for targeted studies on how public accounting might improve the efficacy of foreign aid and the reasons why earlier initiatives have not produced long-term results.
Competent public accounting systems comprise government or public-sector financial systems that are dependable, efficient, and well-designed for carrying out accounting tasks. It suggests systems that accurately track, categorize, and report public spending and income, Respect the law and recognized accounting standards, allow for accountability and openness in the use of public funds, encourage policymakers and oversight organizations to make well-informed decisions, and cut down on chances for corruption, waste, and poor management. Thus, an effective public accounting system guarantees the transparency, effectiveness, and reliability of a government’s financial operations (World Bank, 2021).
This research therefore seeks to answer the following research questions: How does public accounting contribute to transparency and accountability in the management of foreign aid? What public accounting practices are employed to monitor the utilization of foreign aid? What is the relationship between public accounting systems and the effectiveness of foreign aid in achieving development outcomes? & What challenges affect the effectiveness of public accounting in monitoring foreign aid?
2. Methodology
The study adopts a systemic literature review (SLR) approach to examine the role of public accounting in monitoring foreign aid and improving its effectiveness. SLR is guided by the SPIDER framework (sample, phenomenon of interest, design, evaluation, type of research), which is suitable for synthesis of qualitative and mixed methods research. The review is based on the central question: “How does public accounting contribute to the transparency and accountability of the management and effectiveness of foreign aid?”
The study search through the following academic databases: Google Scholar, Scopus, Web of Science, Crossref, Science Direct. A combination of keywords and Boolean operators was used: (public accounting OR public financial management) AND (foreign aid OR development aid) AND (transparency OR accountability OR effectiveness). Search filters are used to limit results by year and language.
Study selection followed the PRISMA 2020 guidelines: Identification: initial search yielded 1,285 records, Screening: After removal of duplicates and scanning of titles/abstracts, 148 articles remained, Eligibility: Complete texts were reviewed based on inclusion/exclusion criteria, leading to 47 eligible studies. Finally, 30 high-quality articles were selected for a detailed synthesis. A PRISMA flow diagram is included in the appendix to visually show the screening and selection process. A standardized data extraction form was used to collect the relevant information from each selected study:
The synthesis of these studies was carried out using a thematic analysis approach. The emerging themes were Transparency through financial reporting, Accountability through audit and public supervision, Integration of aid into public financial systems, Donor influence and institutional reforms. As most of the included studies were qualitative and policy-oriented, meta-analysis was conducted using USAID 2024. Each study was assessed using the checklist of the Critical Assessment Skills Programme (CASP) for qualitative research and policy analysis.
Key criteria include clarity of objectives, adequate methodology, transparency of data collection and analysis and validity of conclusions. Only studies that meet at least 70% of the CASP quality indicators were included in the final synthesis. This review is limited to studies published in English and in full text. In addition, although every effort has been made to include relevant grey literature, some have been missing. Thematic synthesis is also interpreted and can be influenced by the prejudices of reviewers.
2.1. Search Strategy
The following respectable academic databases were searched for relevant literature: Scopus, Web of Science, and PubMed (added because of its coverage of international development and global public health policy). The selection of each database was based on how well it covered international development research, public administration, finance, and governance. To find all pertinent material, a combination of keywords, synonyms, and Boolean operators (AND/OR) were used in the search.
Public accounting, international aid, accountability, transparency, and efficacy were the primary ideas. This is an example search string that has been modified to follow database syntax: (“public accounting” OR “government accounting” OR “public financial management” OR “PFM”) AND (“foreign aid” OR “development aid” OR “development assistance” OR “international aid”) AND (“transparency” OR “accountability” OR “monitoring” OR “oversight”) AND (“effectiveness” OR “impact” OR “results”). Where appropriate, subject headings and terminology from each database (such as PubMed’s MeSH keywords) were used.
The material produced between January 2005 and April 2025 was the focus of the review. The emphasis on public financial reforms, the 2005 post Paris declaration on aid effectiveness (Carneiro, 2024), and the growing emphasis of donors on accountability and openness in aid administration are all reflected in this timeframe. Grey literature was incorporated to supplement peer-reviewed sources by capturing donor reports, institutional research, and recent policy developments. United Nations Development Programme (UNDP), OECD iLibrary, World Bank Open Knowledge Repository, and International Budget Partnership (IBP) Google Scholar (with publications from think tanks, working papers, and dissertations filtered in). Only papers that satisfied the requirements for inclusion and had adequate methodological clarity were considered. Every search result was exported into Zotero for de-duplication and reference management. PRISMA 2020 principles were followed during the selection process, and all inclusion/exclusion decisions were documented and supported to preserve the review’s transparency and reproducibility.
2.2. Inclusion and Exclusion Criteria
The Studies that satisfy each of the following requirements is accepted: exclusively studies in English. Non-English materials cannot be fully evaluated, studies in other languages will be disregarded. Between January 2005 and April 2025, studies were released. This timeline guarantees that the review includes works pertinent to the 2005 post Paris declaration on assistance effectiveness (Carneiro, 2024), a pivotal juncture for global development reforms in foreign assistance transparency and public financial management (PFM).
Empirical study that explicitly evaluates the function of public accounting in tracking foreign aid, including mixed-methods, qualitative, and quantitative studies. theoretical and conceptual works that address paradigms, frameworks, or tactics pertaining to transparency, public accounting, or the efficacy of foreign aid. Government records, donor agency reports, and policy reports pertaining to foreign aid and public accounting systems. case studies that provide actual instances of how public accounting impacts accountability and transparency in the administration of foreign aid.
Studies that concentrate on the management of foreign aid, especially as it relates to the effectiveness, accountability, and transparency of nations that receive international development aid. studies that look at public accounting systems in connection to foreign aid, including financial oversight, reporting, auditing, and budgeting. The focus is on developing nations that rely significantly on foreign help, however studies from both developed and developing nations are welcome.
Research that satisfies any of the following requirements will be disqualified: research articles written in languages other than English. Prior to 2005, studies were published. Because of the emphasis on contemporary reforms in the efficacy of foreign aid and public financial management since the Paris Declaration, older material will not be included. Opinion pieces, editorials, and non-peer-reviewed publications devoid of solid theoretical foundations or empirical support. talks about public accounting in general that doesn’t particularly touch on international aid, its effectiveness, or its oversight. studies that ignore foreign aid or the contexts of aid recipients in favor of concentrating on domestic public accounting, or public accounting within a single nation. Studies that just concentrate on international aid fail to link public accounting procedures to the administration or efficacy of aid.
Taxation or domestic financial systems unrelated to foreign help are the main subjects of research. studies that are unrelated to public accounting systems in the public sector and concentrate on corporate governance or accounting in the private sector. studies that exclude aid-dependent nations or that concentrate on areas where foreign aid has little impact on development.
Only studies that are pertinent to the main subject of this review, the function of public accounting in the efficacy of foreign aid, are included. restricts the attention to recent advancements in the sector (after 2005), emphasizing current problems with public financial reforms and aid administration. excludes research that is too broad or unrelated to the transparency and accountability components of managing foreign aid.
To ensure focus and relevance, the following criteria have been applied as indicated in Table 1. Thus, Table 1 presents the inclusion and exclusion criteria the papers reviewed.
Table 1. Inclusion and exclusion criteria.
Inclusion Criteria |
Exclusion Criteria |
Studies published between 2005 and 2025 |
Studies before 2005 |
Peer-reviewed journal articles, working papers, and policy reports |
Non-academic blog posts or opinion pieces |
Studies focused on foreign aid and public accounting |
Studies focused only on taxation or domestic accounting |
Studies written in English |
Non-English publications |
Empirical, theoretical, or policy-based studies |
Editorials and book reviews |
2.3. The Selection Process
The PRISMA 2020 (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) guidelines were used in the selection of the studies. Title screening, abstract screening, and full-text evaluation were the three primary steps in the selection process. To eliminate publications that were obviously irrelevant, all articles that were found through database and grey literature searches were initially filtered by title. At this point, Zotero reference management software was also used to find and eliminate duplicates.
The abstracts of the remaining publications were used for review. Studies pertaining to public accounting, foreign aid, transparency, accountability, or effectiveness—particularly those that had possible relevance to the research topics—were kept for full-text evaluation. The full texts of the chosen studies were then thoroughly reviewed. Every article was evaluated considering the inclusion and exclusion criteria (refer to the section before this one). This procedure made sure that the final synthesis contained only research that specifically addressed the function of public accounting in tracking the efficacy of foreign aid. Discussions or consultations with a second reviewer were used to settle disagreements during the selection process.
The flow of information through the different phases of the review is outlined below, following PRISMA guidelines in Table 2.
Table 2. PRISMA flow.
Phase |
Records |
Records identified through database searching (Scopus, Web of Science, PubMed) |
1,026 |
Additional records identified through grey literature (Google Scholar, OECD, IBP, World Bank) |
259 |
Total records identified |
1,285 |
Duplicates removed |
1205 |
Records after duplicates removed |
1,080 |
Records screened by title/abstract |
1,080 |
Records excluded (not relevant) |
892 |
Full-text articles assessed for eligibility |
188 |
Full-text articles excluded (not meeting inclusion criteria) |
158 |
Studies included in final review |
30 |
Data PRISMA Flow (2005-2025).
Table 2 shows the records reviewed with their respective numbers.
2.4. Data Extraction
A consistent data extraction form was created and applied to all included research to guarantee accuracy and consistency in gathering pertinent data. The purpose of the form was to gather descriptive and analytical data pertinent to the study’s goals. Table 3 presents the key information extracted from each study.
Table 3. Summary of studies reviewed.
Author (s) |
Year |
Publication |
Country |
Intervention |
Outcomes Reported |
Winters, M. |
2010 |
Working Paper |
Multiple |
Donor accountability tools |
Increased government agency accountability |
Motone, S. |
2010 |
Policy Review |
Global |
Aid policy analysis |
Strong donor influence, mixed outcomes |
IBP (Open Budget Survey) |
2009 |
NGO Report |
85 Countries |
Budget transparency scores |
Correlation with
public accountability |
Data extraction (2005-2025).
Table 3 covers authors, year, type of publication, country, intervention, and outcome of research.
A structured data extraction matrix was created in Microsoft Excel using all the retrieved data. To reduce bias or error, two reviewers independently retrieved data from the studies and cross-checked entries. Any disagreements were settled by discussion or, if required, by a third reviewer. The uniform form allowed for significant topic synthesis during the analysis phase and guaranteed consistency across various study types.
2.5. Quality Assessment
Use This section shows how the quality and potential risk of bias of the included studies were evaluated, using relevant methodologies for distinct study categories. All included studies underwent a thorough quality and risk of bias evaluation using established instruments suitable for the research design type to guarantee the validity and reliability of the results in this systematic review.
Given the varied variety of study types included (qualitative, quantitative, and mixed techniques), the following assessment tools were used: The Cochrane Risk of Bias Tool (RoB 2) was utilized to assess randomized and non-randomized trials. Among the primary areas were bias resulting from the randomization procedure, bias resulting from treatments that were not intended, bias resulting from incomplete outcome data, bias in outcome assessment, and bias in choosing the reported result.
The Critical Appraisal Skills Programme (CASP) checklists were employed in qualitative and mixed-methods studies. Among the assessment areas were a clear explanation of objectives, suitability of the design and technique, meticulousness in gathering and analyzing data, Reflectivity and ethical considerations of researchers, as well as their value and contribution to knowledge.
Grey literature, such as NGO assessments and policy reports: A unique checklist based from the AACODS paradigm (Authority, Accuracy, Coverage, Objectivity, Date, Significance) was used to assess the legitimacy and relevance of non-peer-reviewed sources.
A three-tiered rating system was used for each study: High Quality/Low Risk of Bias: Research that satisfied all or most of the requirements with little to no chance of bias. Moderate Quality/Some Risk of Bias: Research that offers insightful information pertinent to the review issue despite certain methodological flaws. Studies having serious shortcomings in planning, carrying out, or reporting, or those with notable gaps in transparency, are considered low quality and high risk of bias.
The quality rating of each study was noted in the data extraction matrix and considered when assessing the strength of the evidence throughout the synthesis stage. Assessment Procedure: Using the proper instruments, two reviewers independently evaluated each study’s quality; disagreements over score or interpretation were discussed and settled by consensus. In cases where consensus could not be reached, a third reviewer was consulted. During synthesis, studies with higher quality ratings were given more weight. Although they weren’t completely disregarded, low-quality research was handled carefully, particularly when highlighting limitations or triangulating results.
2.6. Data Synthesis
The This section explains the synthesis approach that was used and offers explanation for the selection, considering the nature of the research incorporated. Because the gathered literature had a wide range of study designs, treatments, and outcome measures, a narrative synthesis technique was adopted. When meta-analysis is feasible due to consistent metrics or a and of numerical data, this method can be used to combine findings from many study types, including qualitative, quantitative, and grey literature sources. The rationale behind the Synthesis Method. Research design (policy reviews, empirical econometric research, theoretical analyses, and qualitative case studies) was one area where the papers included varied significantly.
Types of initiatives in public accounting, such as PFM tools, budget transparency changes, and public audits. Results (openness, responsibility, efficiency of aid, and enhancements in governance). This variation meant that meta-analysis was appropriate. Standardized effect sizes and consistent statistical results are essential for quantitative data pooling; however, they were absent from many investigations. Furthermore, important revelations about how public accounting improves transparency and assistance efficacy were mostly context-dependent and necessitated interpretation that went beyond simple numerical summaries.
The synthesis was organized in the following phases and adhered to the Centre for Reviews and Dissemination’s (CRD) recommendations: Arrangement by Theme: Public audits’ role in donor accountability, budget transparency’s effect on local aid ownership, accounting standards’ influence on aid reporting and tracking, and institutional capacity and its impact on public financial management (PFM) systems were among the main thematic areas into which the data were divided.
Comparison Among Studies: Findings from several studies were found to have both similarities and differences. In terms of approach and context, contrasting findings (such as the consequences of fiscal decentralization) were examined. Evaluation of the Strength of the Evidence: While moderate and low-quality research were employed to confirm or challenge patterns, high-quality studies made a larger contribution to the results drawn.
Integration of Grey Literature: Reports from international organizations (e.g., OECD, IBP, World Bank) were added to support empirical findings and provide greater context about aid policy frameworks and real-world deployments of public accounting systems.
Results of the Narrative Synthesis: The synthesis showed a consistent correlation between enhanced accountability, openness, aid effectiveness and robust public accounting systems. However, the presence of participatory methods, political will, and institutional quality all mitigated the magnitude of this association. It was discovered that public accounting worked best when it was included in national systems with sufficient supervision and assistance from external audits.
3. Results and Discussion
3.1. Public Sector Accounting, Transparency and Foreign Aid
Accountability
Foreign aid continues to be a key source of development financing for many low- and middle-income countries. However, its effectiveness has often been compromised by a lack of accountability mechanisms and transparency in the management and use of aid. Public accounting through budgeting, reporting, audit and financial controls has emerged as a fundamental tool for improving transparency and promoting accountability in the management of foreign aid.
The literature review examines how public accounting mechanisms contribute to these objectives. Several empirical studies have highlighted the relationship between public accounting practices and the effectiveness of foreign aid. Recent analyses indicate that foreign aid tends to be more effective in recipient countries possessing robust institutional frameworks, particularly those featuring transparent budgeting and accounting systems (International Monetary Fund, 2010). Burnside and Dollar (2006) also demonstrated that good fiscal institutions, including rigorous public financial management systems, are necessary to have a positive impact on growth in aid.
The effects of public financial management (PFM) changes in Ghana, such as accrual-based accounting and enhanced audit procedures, on the utilization and absorption of donor monies were investigated by Amoako-Tuffour and Atta-Quayson (2016). According to their findings, better accounting procedures increased donor confidence and decreased leaks. Strong financial reporting requirements in Ghana’s public sector were also favorably connected with better donor disbursements and the accomplishment of project milestones, according to Dzansi and Owusu (2020).
Furthermore, according to the OECD (2018), nations with disjointed accounting systems or those that do not integrate off-budget donor funding into their national financial systems are less able to effectively provide aid. Higher assistance transparency and project success rates are typically found in nations that include donor funds into their public accounting systems. Moyo and Mafuso (2017) support this, emphasizing that coordinating donor reporting with government accounting systems reduces redundancy and enhances alignment with national interests.
The set of financial practices, rules, and reporting guidelines used by public organizations to manage their resources is known as public accounting. Strong public financial management systems, including accounting, are essential for the effective distribution and utilization of aid monies, claim Allen & Tommasi (2005). Studies such as by Andrews (2013) indicate that in many aid-dependent countries, public accounting changes have been pushed by donors to improve governance and decrease misuse of development funding
Likewise, research emphasizes that timely and accurate financial reporting is essential to transparency. According to the International Budget Partnership (IBP, 2009), public accounting systems in many aid-recipient nations are inadequate and do not generate reliable data. The openness of assistance flow management increases when nations implement International Public Sector Accounting Standards (IPSAS) or comparable frameworks (Pelizzo & Stapenhurst, 2014). Reforms to increase the visibility of aid reporting in national budgets have also been backed by donor organizations such as the World Bank (OECD, 2005; Accra Agenda for Action, 2008).
Furthermore, through oversight and auditing procedures, public accounting also improves accountability. The Supreme Audit Institutions (SAIs) are essential for monitoring the use of aid funds and disclosing anomalies. According to Guthrie et al. (2015), performance audits of aid-financed projects have led to stronger oversight in countries including Ghana, Uganda, and Tanzania. The involvement of legislative budget offices, civil society, and media in using accounting reports for advocacy has also been noted (IBP, 2012).
Many nations continue to face challenges with inadequate capability, political meddling, and inadequate integration of aid into public financial systems despite changes. Public accounting has little influence when aid is managed off-budget or through parallel donor systems, which erodes accountability and openness, according to studies like those by Moss et al. (2006). Donors circumvent official processes in these situations, which lessens the push for change.
Aid should be in line with national systems, including accounting and auditing systems. According to OECD-DAC (2010), full integration is still a work in progress because of mistrust between donor and recipient governments, but donor coordination and mutual accountability improve when aid is included in the national public accounting framework.
E-auditing, real-time spending tracking systems, and open budget portals are examples of recent innovations that show promise for enhancing public accountability. For instance, the World Bank’s usage of the BOOST platform has made it easier for nations like Kenya and Moldova to keep tabs on their foreign aid spending. The body of research unequivocally demonstrates that public accounting is essential to guaranteeing accountability and openness in the administration of foreign aid. Tracking and evaluating the use of funds is made simpler by efficient financial reporting, auditing, and integration of aid into national budgets. However, for public accounting to fully benefit society, political will, institutional competence, and donor cooperation are still necessary.
There are still issues despite these discoveries. Even if there are accounting mechanisms in place, political meddling, a lack of competence, and a failure to follow through on auditing procedures prevent aid goals from being fully realized, according to studies like Asiedu’s (2014).
3.2. Public Accounting in Ensuring Transparency and
Accountability in the Management of Foreign Aid
In developing nations whose governance institutions are frequently under institutional strain, public accounting is essential to guarantee accountability and openness in the use of foreign aid. Public accounting is a tool used in public financial management (PFM) to monitor, document, report, and audit financial flows, including donor contributions, to guard against abuse and guarantee that aid reaches its intended recipients.
Strong public accounting frameworks have been repeatedly associated in empirical research with increased transparency in the administration of foreign aid. Heckelman and Knack (2005), for example, discovered that the effectiveness of aid is severely compromised in nations with inadequate accounting and auditing procedures, which frequently result in corruption, fund diversion, and resource misallocation. Strong public accounting procedures, he underlined, lessen information asymmetry between donors and governments, promoting continuity and confidence in aid flows.
Asiedu (2014) found that timely, standardized, and publicly available accounting information increases transparency in the use of foreign aid in African nations. Governments with complete accounting systems, which encompass both off-budget and on-budget donor monies, are more likely to foster donor confidence and guarantee that aid is in line with national interests, according to the report.
Research from Ghana adds credence to these assertions. According to Amoako-Tuffour and Atta-Quayson’s (2016) analysis of Ghana’s public financial reforms, greater tracking of aid funds was facilitated by enhanced accounting systems, such as the Ghana Integrated Financial Management Information System—GIFMIS. According to their findings, real-time budget execution reports improved accountability systems and reduced leaks while achieving greater transparency.
Similarly, Dzansi and Owusu (2020) investigated how donor behavior was affected by Ghanaian financial reporting standards. They discovered that improved audit results and greater transparency in donor-funded initiatives were the results of following international public sector accounting standards, or IPSAS. Credible and easily accessible financial reports increased the likelihood that donors would release funding on time.
Public accounting plays a crucial role in transparency, according to the OECD (2018), which also suggests that national accounting standards and donor reporting systems must be harmonized. It might be challenging to assess results and maintain fiscal restraint in nations that do not incorporate donor cash into national accounts due to fragmented reporting.
However, difficulties still exist. Despite having accounting systems, many African nations struggle with poor enforcement, political meddling, and capacity constraints, according to Moyo and Mafuso (2017). These limitations limit public accounting’s capacity to completely guarantee accountability and transparency. According to the authors, enhancing public accountants’ and auditors’ institutional independence and technical proficiency is essential for long-term viability.
Finally, Ayee (2019) pointed out that transparency is not only a technical issue but also a governance issue. While sound accounting systems provide the infrastructure for transparent reporting, political will and civic oversight are necessary to ensure accountability in foreign aid management.
3.3. Moderating Role of Effectiveness Public Accounting Practices
in Monitoring Foreign Aid Utilization
Numerous elements, including institutional capability, political stability, governance structures, and the strength of public financial management systems, affect how effective foreign aid is. Public accounting procedures are one of them that moderate the effectiveness of foreign aid monitoring, accounting, and utilization. In addition to monitoring spending, efficient public accounting systems act as institutional safeguards that affect how aid interventions turn out.
Foreign aid is more likely to be successful in settings with solid institutional and fiscal rules, where public accounting is essential to making sure aid funds are appropriately recorded and assessed (Burnside & Dollar, 2006). Standardized accounting systems ensure that resources are distributed effectively and transparently, which helps mediate the relationship between foreign assistance disbursement and developmental outcomes.
The adoption of Ghana’s GIFMIS (Ghana Integrated Financial Management Information System) increased accountability and transparency in the use of donor funding, according to Amoako-Tuffour and Atta-Quayson (2016). According to their findings, the impact of aid on service delivery was enhanced by good public accounting, which served as a moderating factor by bridging the gap between donor expectations and actual spending.
According to empirical data from Krause and Kaufmann (2011), donor trust is impacted by the caliber of public accounting. Donors frequently route funding through NGOs or parallel institutions in cases when accounting procedures are inadequate, which can lead to fragmentation and less alignment with government interests. Effective accounting systems, on the other hand, improve donor-government relationships by lowering fiduciary risks and boosting dependability, which moderates the degree to which assistance use results in developmental benefits.
Furthermore, public accounting systems reduce the likelihood of corruption in projects receiving aid, according to Moyo and Mafuso (2017). The exploitation of donor monies is considerably less common in countries with transparent financial reporting and frequent audits, according to their analysis of Southern African nations. Public accounting therefore serves as a moderating factor that lessens the adverse consequences of inadequate institutional capability.
Effective accounting procedures, such as following International Public Sector Accounting Standards (IPSAS), were found to attenuate the association between donor disbursement and project effectiveness in Ghana by Dzansi and Owusu (2020). Their regression analysis revealed that donor-funded programs had better public service outcomes and greater completion rates in districts with dependable financial reporting systems.
According to the OECD (2018), efficient public accounting systems function as “trust-enhancing mechanisms” on a larger scale. By facilitating improved planning, budgetary management, and feedback channels between governments and outside development partners, they lessen the effects of foreign aid. Even well-targeted aid may not be sufficient without efficient accounting because of inadequate auditing, misreporting, or poor tracking.
There are still issues despite these discoveries. Asiedu (2014) noted that public accounting systems are in place in many Sub-Saharan African nations, but they are not adequately implemented because of political meddling, weak institutions, and capacity constraints. Public accounting’s moderating influence is lessened in these situations, which compromises aid effectiveness and accountability.
3.4. Challenges That Hinder the Effective Use of Public Accounting
in Monitoring Foreign Aids
Gourfinkel (2022) provides examples of the structural and technological challenges governments in aid-receiving nations encounter when putting Public Sector Accounting (PSA) reforms into practice. Implementation is nevertheless unequal because of a lack of ability, a lack of institutional preparation, and fragmented reform agendas, even with international support and initiatives like the World Bank’s PULSAR initiative. These discrepancies undermine the accountability frameworks required for foreign aid transparency by jeopardizing the comparability and dependability of financial reporting.
The Ghana Food Distribution Corporation (GFDC) is used as a significant case by Uddin and Tsamenyi (2005) to demonstrate how partisanship and subpar implementation make reforms and reporting systems useless even when they are ostensibly in place. Accountability procedures, especially when it came to reporting to monitoring organizations, did not result in significant improvements, and budgeting remained disorganized and unrelated to performance targets.
According to these studies taken together, there are several reasons why effective public accounting in foreign aid monitoring is difficult to achieve: 1) too much political meddling that compromises organizational autonomy (Honig, 2019); 2) a lack of institutional capacity and disjointed implementation of reforms (Gourfinkel, 2022); and 3) the continued use of politicized and inefficient budgeting procedures even in the presence of formal accountability frameworks (Uddin & Tsamenyi, 2005). These structural problems undermine trust and efficacy in the utilization of foreign aid in addition to reducing transparency.
Again, a rising corpus of research from 2010 to 2025 shows enduring obstacles that prevent these objectives from being achieved, especially in fragile and aid-dependent situations. The inconsistent and superficial nature of aid evaluations is one persistent problem. According to Clements (2020), the prevalent framework for assessing aid, which is based on the DAC criteria, permits donors to subjectively interpret effectiveness, resulting in inadequate monitoring and skewed assessments. The absence of independent, standardized cost-effectiveness evaluations compromises learning and accountability, undermining the function of public accounting in directing aid management.
Like this, emerging contexts clearly face technological obstacles when it comes to adopting international standards, especially the International Public Sector Accounting Standards (IPSAS). While IPSAS promised improved openness and comparability, Woldehawariat (2017), who studied international charities in Ethiopia, discovered that its implementation was beset by a lack of technical knowledge, insufficient regulator assistance, and increased administrative costs. Government regulations drove the adoption more so than stakeholders’ belief in its advantages, demonstrating an accounting culture that is more focused on compliance than values.
From a wider governance standpoint, Yamamoto and Schührer (2023) emphasize that while accrual accounting and performance-based financial management were intended to be introduced by New Public Management (NPM) reforms, the actual results have been inconsistent. Public financial management (PFM) innovations have not always resulted in increased openness or efficiency, especially in areas that are prone to crises. This calls into question the contextual relevance and applicability of imported accounting changes in vulnerable environments.
Liberia is an example of these difficulties in miniature. According to Sokpor (2014), several systemic and institutional obstacles impede the efficient application of national PFM systems in projects supported by donors. These include limited institutional capability, overlapping accountability frameworks, and donor-government practices that are not aligned, all of which cause the accounting and reporting processes to become fragmented. His research emphasizes that difficulties frequently emerge from both donor and recipient governments, highlighting the necessity of shared accountability in removing these structural obstacles.
Together, these revelations and past research—like Honig’s (2019) discovery of excessively strict management control in uncertain settings or Uddin and Tsamenyi’s (2005) observation of ongoing politicization and subpar budgeting practices in Ghana—showcase a pattern of political, technical, and structural obstacles that impede public accounting’s ability to improve foreign aid monitoring.
This synthesis demonstrates that the difficulties public accounting has in foreign aid monitoring are multifaceted by combining data from several contexts, including Ghana, Ethiopia, Liberia, and larger international frameworks. These include: Politicalized and ineffective budgeting (Uddin & Tsamenyi, 2005); fragmented and biased evaluation frameworks (Clements, 2020); low institutional capacity and lack of technical support for reforms like IPSAS (Woldehawariat, 2017); contextual misalignment of NPM-driven PFM reforms (Yamamoto & Schührer, 2023); overcentralized control that restricts field responsiveness (Honig, 2019); and incomplete adoption of reform frameworks with insufficient support (Gourfinkel, 2022).
When combined, these issues jeopardize accountability, transparency, and eventually the efficacy of foreign assistance. In addition to technical changes, political will, institutional fortification, and the standardization of donor and recipient activities around common objectives and norms will be necessary to overcome them.
Table 4. Summary of included studies (Tabular format).
Authors |
Year |
Country/ Region |
Study Type |
Public Accounting Mechanism |
Key Findings |
Winters, M. |
2010 |
Global |
Theoretical Review |
Accountability chains in aid |
Stronger implementing agency accountability improves aid project outcomes |
IBP (Open Budget Survey) |
2009 |
85 countries |
Survey/ Assessment |
Budget transparency |
Low global transparency; political will key to reforms |
Lessman, C. |
2010 |
Global |
Quantitative Panel |
Fiscal & political decentralization |
Fiscal decentralization reduced aid effectiveness; political decentralization mixed |
Motone, S. |
2010 |
Global |
Policy Analysis |
U.S. aid governance structures |
Mixed results; driven by security and policy goals rather than transparency |
OECD, World Bank |
2005-2020 |
Developing Countries |
Mixed/Reports |
PFM systems, PEFA tools, donor audits |
Comprehensive PFM systems correlated with higher accountability in aid spending |
Data (Crossref 2005-2025).
After Key features, theme findings, and a summary of the collected research (in tabular format) are given in this part. The PRISMA flowchart, which was previously described in the Study Selection section, is also described here. After the eligibility criteria were applied, 30 studies in all were included in the final synthesis. The geographic scope, methodology, emphasis on public accounting systems, and assessment of the efficacy of foreign aid were all different across this research. Table 4 presents the summary of studies included in the review of this study. Table 4 indicates the authors, year of publication, country or region, study type, public accounting mechanism and key findings of papers reviewed.
Study Types: Included papers included theoretical publications (3), policy reviews and donor reports (8), qualitative case studies (6), empirical quantitative analyses (10), and NGO/agency reports (3). Geographic Focus: Many studies were international or multi-national in scope. Some concentrated on Latin America, Southeast Asia, and Sub-Saharan Africa. Publication Timeframe: The studies focused on the post-Paris Declaration (2005) reform era and covered the years 2005-2023. Sources include scholarly conference papers, international donor reports, NGO evaluations, and peer-reviewed journals. The key themes discussed in this study are in Table 5. The key findings for each of the themes are also presented in Table 5.
Table 5. Key findings by theme.
Theme |
Summary of Key Findings |
Transparency and Budget Reporting |
Budget transparency strongly improves domestic accountability and donor trust. Low-cost reforms can yield significant improvements (IBP, OECD). |
Auditing and Oversight Mechanisms |
Independent audits and external reviews were essential in identifying mismanagement in aid projects (World Bank, PEFA reports). |
Decentralization and Fiscal Controls |
While decentralization improves political participation, it often reduces fiscal efficiency if local systems are weak (Lessmann, 2010). |
Donor Accountability to Recipients |
Donors often bypass national systems, weakening domestic accountability. Participation does not guarantee recipient control (Winters, 2010). |
Institutional Capacity and PFM Systems |
Countries with mature PFM systems (budgeting, accounting, reporting) show better alignment with aid objectives and outcomes (OECD, World Bank). |
Data (2005-2025).
Following PRISMA guidelines, the following flowchart stages were used in the study selection process: Databases were used to identify records (n = 1,026), additional records were found in grey literature (n = 259), duplicates were eliminated (205), records were screened by title/abstract (1,080), full text was evaluated (188), and studies included in synthesis (30).
This systematic research shows that public accounting practices, including financial reporting, auditing, and open budgeting, are crucial for improving accountability and transparency in the administration of foreign aid.
According to the assessment, nations with robust Public Financial Management (PFM) systems are more likely to enhance development results, decrease corruption, and make efficient use of aid. One common theme is that when recipient governments are held responsible through formal systems like external audits, public expenditure tracking, and open budget processes, the efficacy of foreign aid increases. However, the availability of tools alone does not ensure outcomes; civic involvement, political commitment, and institutional quality are important facilitators.
Comparison with Previous Literature: These results are consistent with earlier research that highlights the chain of accountability in aid distribution, such as that of Winters (2010). Like this, the Open Budget Survey (2008) demonstrates that many nations lack transparency in their budgetary procedures, but when political will is there, improvements can be made with comparatively little financial outlay.
Lessmann (2010), on the other hand, offers a more nuanced perspective by emphasizing that when sub-national units lack financial management competence, fiscal decentralization—which is frequently promoted for local accountability—can decrease aid effectiveness. This is in line with the literature’s general agreement that context is important and that public accounting changes need to be customized to each nation’s unique administrative circumstances.
The results support the idea that institutional processes, such as public accounting, act as crucial bridges between aid inflows and development outcomes, which advances theories of governance and development. This is consistent with principal-agent theory, which holds that structured accounting procedures can lessen information asymmetry and misaligned incentives.
The review advises practitioners that aid programs should give priority to auditing systems, budget transparency, and participatory oversight. Donor agencies are urged to support alignment with national budget systems and invest in public accounting institutions’ capacity building.
From a policy perspective, the findings reinforce calls for: Mandatory aid reporting frameworks, Strengthening Supreme Audit Institutions (SAIs) & Linking disbursement of aid to PFM reform benchmarks. Donors and international organizations should use tools like PEFA assessments and OECD-DAC evaluations to ensure accountability is embedded in aid delivery systems.
Thoroughly incorporating a variety of sources (scholarly, grey literature, and NGO reports), Utilizing a systematic framework (SPIDER) to identify and synthesize studies, Thematic analysis enables a sophisticated comprehension of various accountability mechanisms.
Limitations: Potential publication bias: studies with negative or non-significant findings may be underreported, Inconsistent terminology across studies made comparison challenging (e.g., “transparency” vs “open budgeting”), Limited quantitative data for conducting a meta-analysis, due to diverse metrics and outcome measures.
4. Conclusion
The function of public accounting in improving accountability and transparency in the administration of foreign aid was examined in this comprehensive assessment of the literature. The results show that strong public accounting systems greatly increase the effectiveness of help, especially in the areas of financial reporting, auditing, and budgeting. Aid resources are allocated and used more effectively in nations with robust Public Financial Management (PFM) systems and external supervision organizations. Mechanisms including independent audits, open budget procedures, and participatory spending tracking have been repeatedly linked to increased development impact of aid initiatives, decreased corruption, and enhanced public trust.
The review also showed that accounting systems by themselves are not enough. Civil society involvement, political commitment, and institutional excellence are critical to successful implementation. Additionally, aid efficacy may be hampered by the devolution of fiscal duties without equivalent accounting competence, particularly at sub-national levels.
Contribution to the Field: By offering a comprehensive viewpoint on the ways in which public accounting affects the results of foreign aid, this analysis advances the fields of development finance and public sector governance. It demonstrates how these components interact in intricate aid situations by bridging the gaps between donor responsibility, government financial management, and citizen scrutiny. The review provides a structured synthesis of empirical and theoretical studies by taking a methodical approach based on the SPIDER framework, which clarifies a subject that is frequently dispersed throughout the fields of public administration, economics, and policy.
Furthermore, this study advances the conversation beyond the conventional focus on assistance volume and donor intent by highlighting the critical role that accountability infrastructure plays in converting aid inflows into sustainable development results. More empirical studies employing large-scale data are required to assess the causal relationship between aid effectiveness and public accounting methods in various national contexts.
Comparative Case Studies: Extensive research contrasting successful and unsuccessful aid initiatives may reveal effective practices in public accounting integration that are tailored to contexts. Sub-national Accountability: The effects of administrative and financial decentralization on the openness of aid use at the local government level warrant more investigation.
Innovation and Technology: Future research could investigate how digital public financial systems, such blockchain and e-budgeting, can increase or decrease accountability in aid management. Stakeholder Engagement: To improve accountability, more research is required to determine how civil society groups and citizen feedback systems may be successfully integrated into public accounting frameworks.