BUDGET TRANSPARENCY AND ACCOUNTABILITY
THE CODE OF GOOD PRACTICES ON FISCAL TRANSPARENCY
Following the Asian economic crisis in the late 1990s, the international financial institutions developed codes of practice on economic governance, which include the Code of Good Practices on Fiscal Transparency (2007). This has since been revised and extended, and in the most recent version the International Monetary Fund defines four pillars of fiscal transparency[1]:
- Clarity of roles and responsibilities: The government sector should be distinguished from the rest of the public sector and the rest of the economy, and policy and management roles within the public sector should be clear and publicly disclosed. There should also be a clear and open legal, regulatory, and administrative framework for fiscal management.
- Open budget processes: Budget preparation should follow an established, realistic timetable and be guided by well-defined macro-economic and fiscal policy objectives. There should be clear procedures for budget preparation, execution, and monitoring.
- Public availability of information: The public should be provided with comprehensive information on past, current, and projected fiscal activity and on major fiscal risks. Fiscal information should be presented in a way that facilitates policy analysis and promotes accountability. The timely publication of fiscal information should be a legal requirement of the government.
- Assurance of integrity: Fiscal data should meet accepted data quality standards. Fiscal activities should be subject to effective internal oversight and safe-guards and be externally scrutinized.
THE OPEN BUDGET INDEX
The only existing civil society-led measure of budget transparency is the Open Budget Survey, conducted by the International Budget Partnership. Carried out every two years and covering more than 90 countries, this independent survey allows for a comparative analysis of the levels of transparency and accountability in public budgets. Internationally recognized criteria are used to give each country a score on transparency. This 100-point scale is the Open Budget Index.[2]
The 2010 Open Budget Survey found that 74 of the 94 countries assessed failed to meet basic standards of transparency and accountability in their national budgets. But it explains that all governments can improve transparency and accountability quickly, at little extra cost, by publishing online all of the budget information they already produce, and by inviting public participation in the budget process.
POINTS OF INTERVENTION
Nothing goes into a budget unless it is a priority. Have you ever been in a situation where you have a lot of money and nothing to spend it on? This is the same for governments: the money the government collects from citizens or businesses or borrows, is not enough to cover everything; therefore, it has to decide what to spend its money on. Those decisions are guided by policy priorities, while the government’s decision to give money is called allocation. If you want to ensure that the government allocates public funds to the services you need, you should ensure that those services or needs are high among the government’s policy priorities.
When you identify your issue as a priority, you need to carefully follow the process through a budget cycle:
The budget cycle starts with FORMULATION, which is a process of drafting a budget. In general, line/sector ministries and agencies come up with their needs and calculations, and the Ministry of Finance aggregates them into a draft national budget. Here, you should find partners for whom your issue is relevant (e.g. Ministry of Health) and work with them to ensure that your needs are included in their proposal. The executive branch normally formulates the annual budget behind closed doors. In some cases, it may release a discussion document or an overview of the budget in advance, but generally the legislature and civil society have little direct access to this stage of the process. Nevertheless, because the budget is rarely constructed from scratch, major parts of the budget may be anticipated by stakeholders outside the executive branch. This creates an opportunity for analysis and advocacy at the formulation stage. During the development of the budget, non-governmental groups can release analyses on issues known to be under consideration, or that they believe ought to be priorities, in hopes of influencing the budget being formulated. There might also be opportunities for NGOs to establish informal lines of communication with executive branch officials. In countries where the legislative process has little impact on the budget, NGOs may have to concentrate on the formulation stage, as that is when the key decisions are made.
After formulation, the budget is ENACTED, meaning that is taken for discussion, usually to the parliament, which enacts it into law. Use opportunities such as public hearings and “friendly” parliamentarians to ensure that your priorities are either kept in the budget or added, as the parliament can request amendments.
It is during this phase of the budget cycle that non-governmental groups often have the best opportunity for input. Since the public discussion of and interest in the budget are typically at their highest point when the Ministry of Finance presents its budget to the parliament, this creates opportunities for non-governmental groups to get media coverage for their budget analyses. Further, in countries where the parliament plays a more active role in the budget process, CSOs are frequently asked to serve as experts at hearings and to comment on budget proposals in other ways. Their analyses can influence and enable MPs to take a more active or radical position during the debates and highlight important issues about the impact of budget proposals on groups of special interest (e.g. PWUD).
So, when a budget is enacted, obtain a copy and track amendments for the parts that interest you (yes, the government can make numerous amendments).
Next, the budget cycle moves to an EXECUTION PHASE. Implementation of the budget is, of course, an executive function. Unless the executive branch issues regular public reports on the status of expenditure during the year, non-governmental groups have limited ability to monitor the flow of funds. But non-governmental groups do have an interest in an effective and transparent monitoring system that promotes adherence to the budget and reduces mismanagement or corruption. Groups may advocate for budget reforms to improve budgetary control. Similarly, they may engage in monitoring activities. They can also assess the quality of the spending to see if the policy goals associated with the budget allocation are being met and if government funds are being used effectively.
During the execution phase, the government starts spending money – buying goods or services, paying salaries, building infrastructure, etc. The budget is nothing without execution! You have to monitor this process: identify if the services reached the people who needed them and if the quality was good; see if tenders were transparent and that the drugs procured were of high quality. And if the government fails to spend all the money (yes, sometimes, this does happen), suggest smarter ways to spend it for the needs of your community.
As the budget is executed, there are numerous OVERSIGHT bodies that perform audits and monitor the process. There are public organizations that perform these services, but there are also NGOs that monitor the budget process, and you are one of them!
This stage of the budget represents a valuable opportunity for CSOs to obtain information on the effectiveness of particular budget initiatives, as well as to advance accountability by assessing whether the legislative and executive branches of government responded appropriately to the findings of audit reports. When available in a timely manner, audit reports often document mis-expenditures, mal-expenditures, and procurement irregularities. NGOs should attempt to spread such information widely and use it to bring about reforms.
It is really important that you understand your government’s budget cycle so that you know when to lobby or raise issues to inform discussions and influence decisions.
The work that you do to analyze, monitor, and track the government’s budget will not, in itself, bring about changes. You need to share and use your findings strategically and know when and how to lobby key decision-makers with evidence to support your arguments about what needs to change, and why.
[1] International Monetary Fund. 2007. Code of Good Practices on Fiscal Transparency. Washington, DC: IMF. www.imf.org/external/np/pp/2007/eng/051507c.pdf