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ACCA Strategic Professional · Strategic Business Leader · Public sector governance

A national agency outsources benefit payment processing to a private firm under a long contract. The private firm suffers a data breach exposing citizens' records. The agency's chief executive argues responsibility lies wholly with the contractor. Which analysis is most consistent with public sector governance principles?

The agency keeps ultimate accountability to the public and the legislature. Outsourcing delegates the task of processing but not responsibility, so the agency must oversee the contractor's controls and manage the third-party risk, even if it can recover costs contractually.

  1. AThe chief executive is correct because the contract legally transfers all duties to the supplier
  2. BResponsibility passes to citizens whose data was exposed, since they consented to the service
  3. COnly the contractor's shareholders are accountable because they own the firm
  4. DThe agency retains ultimate accountability to the public and the legislature, so it must oversee the contractor's controls and cannot delegate accountability, only the taskCorrect

Explanation

Outsourcing transfers delivery, not accountability. Public bodies remain answerable to the legislature and citizens for stewardship of services and data, so they should monitor supplier controls and manage third-party risk. Contractual indemnity may allow recovery of cost but does not remove public accountability.

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