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fusion of government and legislative majorities diminish the incentives of legislators to restrain government. Moreover, executive discretion and expeditious modes of government conspire to neutralize fiscal control and external oversight.

Third, AAAs cannot be strengthened or reformed in isolation. Too often, reformers approach organizations in isolation, as self-containing organizations, overlooking the broader governance and institutional context in which they are embedded and the linkages between them. As Stein et al. (2005:258) aptly stress, ‘it is difficult to produce institutional change by addressing an institution in isolation. To intervene effectively, it is important to understand the complex interdependencies that exist among institutions […].’ Diamond (2001:1) underscores that:

‘endemic corruption is a systemic disease that can only be controlled with a systemic cure: a single institution, such as an anticorruption commission, will not do. Effective and durable corruption control requires multiple, reinforcing and overlapping institutions of accountability.’

By failing to explore the linkages between organizations, reformers often fail to bring about systemic improvements and lasting change. In Chile, for example, recent reforms put forward by the government in 2006 shy away from addressing the dysfunctional linkages between the CGR and the legislature. There indeed exists unexplored potential to improve government accountability in public expenditure management, by improving the quality of the linkages between external auditing and legislative oversight.

Fourth, stages of institutional development cannot be bypassed. Gradual reforms within existing external auditing systems are likely to be more successful than abrupt changes of fiscal control systems. In Brazil, incremental adjustments since 1891 have contributed to gradually strengthen and adapt the TCU. Conversely, failure to reform in Chile threatens the CGR with becoming antiquated and irrelevant. Political institutions in general and AAAs in particular are rooted in their own trajectories and their effectiveness is highly dependent on the administrative traditions in which they are embedded. Therefore, as Stein et al. (2005:258) emphasize, it is critical to conceive reforms as a matter ‘not of achieving an ideal model, but improving the existing model on the basis of available resources and existing restrictions.’

This research also confirms North’s theories on institutional change. Budget institutions and external audit arrangements in particular are costly to reform and exhibit a high degree of inertia, both of which result in a strong status-quo bias. They change in significant ways only when performance is highly unsatisfactory. Furthermore, as Tsebelis and Chang (2004:449) show, ‘countries with many veto players […] will have difficulty in altering budget structures.’ However, in such contexts, as in Brazil, while reform is harder to achieve, it is also harder to undo and therefore more credible (Haggard and McCubbins 2001).

Fifth, radical reform strategies based on the institutional transplant of exogenous models are likely to fail. Radical reforms based on the import of technical solutions are likely to fail if they are adequately internalized or if the domestic political process denaturalizes them. The key challenge is not how to change systems, but rather how to make existing systems and institutions work and work better. Reform strategies that seek to mechanically transplant institutional audit models from abroad without taking into account the underlying conditions that make them work are likely to fail. Institutional arrangements for external auditing are path-dependent and country specific, and therefore difficult to replicate or transpose. Hence, rather than seeking to transplant ‘best practices’ from abroad, reformers should privilege ‘best fit’ approaches to achieve ‘good enough’ governance reforms and gradual improvements (Grindle 2004).

The radical change of the external audit model in Argentina in 1992, which changed from the court model to the collegiate model almost overnight, constitutes an example of reform failure


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