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FISCAL TRANSPARENCY AND PUBLIC CONTROL OVER THE BUDGET SPENDING - A REVIEW OF COMMON INTERNATIONAL STANDARDS AND GOOD PRACTICES
Pavlina Petrova
I. BRIEF THEORETICAL NOTES AND BASIC PRINCIPLES OF FISCAL TRANSPARENCY The issues of fiscal transparency and public control over the budget spending are of great importance for all democratic societies, and particularly important for transition countries since it is widely believed that they are crucial preconditions for good governance and have large and positive effect on fiscal performance. Some surveys suggest that higher levels of fiscal transparency are associated with lower levels of debt, lower level of spending [1] and lower budget deficits [2]. According to other surveys results if the budgets were open to public and effective legislative scrutiny, there would be less scope for deviation from policy decisions and reversal of budget allocations, i.e. the ruling elite would be less likely to manipulate the budget and consequently there would be less room for corruption [3]. There are various theoretical viewpoints when discussing the specifics of fiscal transparency. The most appropriate and useful for the purpose of preparing a budget watch model, however, are those presented by Tsuru Kotaro, a RIETI Senior Fellow, in an article published in Economics Review [4]. Kotaro analyses the issue based on the theory of Kopits and Craig [5], which comprehensively takes it up from the three viewpoints of "institutional transparency," "accounting transparency" and "transparency of indicators and projections." Kotaro indicates that in the case of “institutional transparency” the important point is how to provide effective monitoring and governance to a government, which acts as an "agent" in undertaking the planning and execution of budgets, in a way that best benefits the general public, who are the "principal". He quotes Kopits and Craig (1998) who, as a specific means to realize this, propose that the government should set forth fiscal targets and policy priorities, explain them in budget documents, ensure transparency in executing the budget, and disclose the results of performance assessment and financial audit. At the same time, they call for the establishment of an independent monitoring body that has wide investigative authority over government activities. The “accounting transparency” is more complicated issue because normally the governments submit the budget documents to the legislature, therefore it is fair to say that the details of a government budget are fully disclosed to the public. By natural necessity, however, budget documents of a national government are extremely complicated and far from being easy for understanding from the general public. What is worse, politicians and bureaucrats may intentionally make them more complicated than necessary and may use ambiguity to hide lax fiscal expenditures in pursuit of some personal interests. That is why Kotaro makes the conclusion that with regard to accounting transparency, it is important to provide comprehensive information, including budget breakdowns for each entity as well as on inter-entity fund transfers, in a way that is true to the reality. The general government budget, including budget breakdowns for central and local governments, should also go as far as detailing off-budget funds such as social security funds, as well as the public corporations' quasi-fiscal activities. The last but not least is the “transparency of indicators and projections”. A typical technique to which government officials and politicians resort in justifying excessive fiscal expenditures is to provide optimistic projections for economic growth and tax revenues based on optimistic predictions of the economy. Therefore, it is extremely important to ensure transparency in projections, which would give to the public the opportunity to make realistic assessment of the budget size relevance. The government should also provide information on various economic indicators (transparency in indicators) in order to enable the public to adequately understand and analyze the current state of government fiscal conditions and possible alternatives. II. COMMON INTERNATIONAL STANDARDS AND BEST PRACTICES Recognizing the great importance of fiscal transparency the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) developed special codes of good practices on fiscal transparency on central government level. IMF Code of Good Practices on Fiscal Transparency[6] The IMF experience of many years suggests that the good governance is central to achieving macroeconomic stability and that the “fiscal transparency would make a major contribution to the cause of good governance. It should lead to better-informed public debate about the design and results of fiscal policy, make governments more accountable for the implementation of fiscal policy, and thereby strengthen credibility and public understanding of macroeconomic policies and choices. In a globalized environment, fiscal transparency is of considerable importance to achieving macroeconomic stability and high-quality growth.”[7] This is the reason why in 1998, in the wake of the Asian financial crisis, the IMF came to the decision to prepare a Code of Good Practices on Fiscal Transparency. The Code integrates principles and good practices distilled from the IMF's knowledge of fiscal management practices in its member countries and is based around the following key objectives: the division of roles and responsibilities in government should be clear; the information on government activities and budget spending should be available for the public; budget preparation, execution, and reporting should be undertaken in an open manner; and fiscal information should attain widely accepted standards of data quality and be subject to independent assurances of integrity. The Code sets out what governments should do to meet these objectives in terms of principles and practices. It does not specifically advocate participation of civil society in budget processes, though such approaches are not excluded. In order to make clear the definitions and main concepts laid down in the Code of Good Practices on Fiscal Transparency IMF prepared a Manual on Fiscal Transparency. It consists of four parts - Part I - Clarity of Roles and Responsibilities; Part II - Public Availability of Information; Part III - Open Budget Preparation and Reporting; Part IV - Assurances of Integrity. According to the Manual since the annual budget is almost without exception the main instrument of fiscal policy, the openness of the budget process and the information contained in and presented with the budget is central to fiscal transparency. The principles and practices relating to openness of the budget process concern budget documentation, budget presentation, procedures for budget execution, and fiscal reporting. According to the Code’s recommendations: there should be regular fiscal reporting to the legislature and the public where the budget information should be presented in a way that facilitates policy analysis and promotes accountability. IMF issues country reports on fiscal transparency that measure country performance against the Code. OECD Best Practices for Budget Transparency [8] In 2001 OECD developed guidelines of what are considered to be best practices for transparency regarding budgets. The OECD Best Practices for Budget Transparency are based on Member countries’ experience and are focused on information that should be publicly available as part of the budget documents during each stage of the budget process. In the OECD Best Practices budget transparency is defined as "full disclosure of all relevant fiscal information in a timely and systematic manner". The OECD Best Practices for Budget Transparency consists of three parts. Part I lists the principal budget reports that governments should produce and their general content: the budget; a pre-budget report; monthly reports on budget implementation; a mid-year report; a year-end report; a pre-election report; and a long-term report. Part II describes specific disclosures to be contained in the reports: economic assumptions; tax expenditure; financial liabilities and assets; non-financial assets; employee pension obligations; and contingent liabilities. Part III highlights practices for ensuring the quality and integrity of the reports: accounting policies; systems and responsibility; audit; and public and parliamentary scrutiny. The recommendations described in Part I and Part II are particularly important for the purpose of preparing an effective budget watch model. It is not possible to control the budget spending without access to data and information about the budget documents and reports. That is why regarding the public and parliamentary scrutiny the best practices recommend that: - All fiscal reports referred to in these Best Practices should be publicly available. This includes the availability of all reports free of charge on the Internet; - The finance ministry should actively promote an understanding of the budget process by individual citizens and non-governmental organizations. The OECD Best Practices for Budget Transparency provide a sort of benchmark for government performance. They are designed as a reference tool for Member and non-member countries for use in order to increase the degree of budget transparency in their respective countries. However, they are not meant to constitute a formal “standard” for budget transparency. Although prepared for the purpose of assuring central government fiscal transparency the OECD and IMF codes and best practices on fiscal transparency could be easily adapted for the local government budget processes. Their basic principles will help in drawing up the general framework of a budget watch model, which could be used for tracking different kinds of budget expenditures on central or local level. Since the healthcare system financing is provided by the central and local government budgets as well as by mandatory social and health insurance contributions the model should take into account the state of fiscal transparency on all budget levels and to propose relevant changes if needed. III. OVERVIEW OF BUDGET TRANSPARENCY AND PUBLIC OVERSIGHT IN TWO SELECTED COUNTRIES III.1. Hungary Health care system The current structure of the Hungarian health care system represents a considerable departure from the former, highly centralized, state-socialist model. Since 1989 the system has become more pluralist with responsibilities divided between various players. Health services in Hungary are funded primarily through health insurance from the Health Insurance Fund (HIF) for recurrent costs, administered by the National Health Insurance Fund Administration (NHIFA). Capital costs are financed mainly from taxation. Health care services are delivered predominantly by local government-owned public providers, who contract with the NHIFA. The national government is the dominant regulator of health services, exercising statutory supervision over the HIF and controling the NHIFA. In addition, it provides capital grants and delivers public health and some tertiary care services[9]. Legislative framework for health services provision Hungarian constitution clearly defines the roles of the executive, legislative, and judicial branches of government and the 1990 Act on Local Government defines the responsibilities of local governments.[10] The central government does not have direct control over local governments (made up of county and municipal level bodies), but exercises considerable leverage, through transfers and requires certain preconditions to be met for local government borrowing. More than 50 percent of local budgetary institutions have significant own revenues but transfers constitute the majority of local government revenues. There are also county and regional development councils that are responsible for distributing regional development subsidies to lessen regional economic disparities. Since the establishment of the two-tier local government system in 1990 (which replaced the “council” system of the communist regime), local governments have become key actors in the health sector. Although national policy determines the broad framework for local policy, the Constitution guarantees the discretion of local governments on local affairs, which cannot be overruled by national authorities. Act LXV of 1990 on Local Governments defined the basic structure, rights and duties, sources of funds and properties of local governments. The municipal and county governments share responsibilities on the basis of the principle of subsidiarity. This means that county governments take over only public services that municipal governments cannot undertake and are willing to transfer to the county level. The 1990 Local Government Act assigned responsibility for local health services to local governments, implying that they should plan health services for the local needs. Responsibility for primary care rests with municipalities and that for secondary care with counties, but they are allowed to contract out service delivery to private providers. There is a large proportion of primary care contracted out to entrepreneur family doctors (under the scheme of the so-called functional privatization), and a smaller segment of secondary care contracted out mainly to a few church-owned hospitals. These providers have two types of contracts: one with the local government, in which they take over service provision, and the other with the county offices of the NHIFA, to become eligible for HIF funding. The same act transferred the ownership of the bulk of primary care facilities, polyclinics and hospitals from national to local government. As a result, local governments have become the main health care providers in the Hungarian health care system. Municipalities usually own primary care facilities, and depending on the size of the municipality may own and run outpatient clinics and municipal hospitals. County governments usually own large county hospitals that provide secondary and tertiary care. Local government-provided health services are financed by HIF. Capital investments should be provided by the local governments as they are health care facilities owners. Since capital costs are usually higher than the revenue capacity of local governments, the national government provides conditional and matching capital grants via the system of “earmarked and target subsidies”. Legal preconditions for fiscal transparency According to the IMF report on fiscal transparency [11] in recent years Hungary has made significant progress in increasing the transparency and accountability of government, and in some areas has established high standards of practice relative to the IMF fiscal transparency code. The activities of the fiscal authorities are clearly spelled out in the Act on Public Finances (APF), which conforms to EU requirements for regulating budget management and provides for comprehensive coverage of central budgetary institutions, extra-budgetary funds, local budget, and the social security funds (the health insurance and pension fund) [12]. The APF was put in place in 1992 as one of the first measures to modernize the Hungarian budget process. Thanks to the recent reforms, Hungary already has a modern and well-working budget process that has comprehensive coverage and is couched in a well-articulated medium-term economic framework. The number of extra-budgetary funds has been reduced significantly, comprehensive fiscal data are reported, and there are effective internal and independent external audit controls. According to the Public Availability of Information section of the IMF report “Budget documents provide a comprehensive coverage of general government with the biennial budget providing detailed information on the general government and each of its subcomponents (with both a functional and economic classification) for the two preceding years, the two budget years, and an indicative projection for the following third year. In the case of local governments, only the subsidies transferred by the central government budget are subject to parliamentary approval, but complete information on local budgets and outcomes is presented for information. The final report contains an analysis detailing any deviation between the budget and the actual outturn and identifying the effect of changes in the macroeconomic environment, forecast errors, and policy changes during the budget year. Budget details are available through the finance ministry website at http://www.meh.hu.” The Hungarian government has recently put in place a system of two-year budgeting and multiyear planning which are intended to be a permanent feature of fiscal management. These two-year plans apply to the central government, social security funds, and the two extra-budgetary funds. In addition the government is encouraging local governments to prepare two-year budgets. The authorities comply with the requirements of the APF to present the final accounts—for the central government, social security funds, extra-budgetary funds, and local budgets—to parliament within eight months of year-end (requiring presentation to the State Audit Office within 6 months). During the year, the Ministry of Finance publishes monthly budget monitoring reports (covering the central government, social security, and extra-budgetary funds) within one month of month-end and sends these reports to the State Audit Office (SAO), the Government Control Office (GCO), and various parliamentary committees. From 1992 to 1998, the government was required under the APF to present a mid-year report to parliament; this obligation was removed in 1998 since detailed monthly reports are readily available. Under the biennial budget the requirement for annual reports will be retained. Internal management and controls have been greatly enhanced in recent years by the creation of the Hungarian State Treasury (HST), which controls all disbursements against authorization by the central budget, the extra-budgetary funds, and the social security funds. The HST is responsible for ex ante control and overall supervision of the process of appropriation control. The GCO, which operates under the direction of the prime minister's office, is responsible for internal audit and control. The GCO investigates the impact of expenditure or revenue collection, financial controls, and the management of budgetary institutions and the extra-budgetary funds, including the use and management of public funds given through public foundations, county and regional development councils, and non-governmental organizations. It also reviews the effectiveness of controls at any level including ministries' internal control units and the systems and methodologies of the HST. Each budgetary organization has its own internal control unit responsible for ensuring effective control (mainly ex post) and monitoring of the effectiveness of control systems. Public participation An effective form of public participation in the health care matters are the patient associations which recently are growing in number and influence. In 2000, there were over 80 organizations active in various fields of health and health care. They represent the interest of patients at pharmaceutical price negotiations, for example. Their participation has been institutionalized in waiting list committees, in the National Health Council and in hospital supervisory councils (1997/16, 1998/22, 1998/23, 1998/25). III.2. Slovenia Health care system The Slovenian health care system is financed by the state budget, local government budgets and compulsory health insurance contributions. Similar to most systems in Europe, the Slovenian health care system has characteristics of both the integrated and the contract model of health care systems. While the services performed are paid by the Health Insurance Institute of Slovenia (HIIS) based on the contract between HIIS and the health care institution, the capital investments in health care facilities are covered by the central or local government budgets. The state budget covers the capital investments for all secondary and tertiary health care facilities. It also covers expenditures for the national public health program, which includes the traditional national prevention programs as well as some new health promotion programs, medical education and training, research, the national health information system, cooperation between sectors, the national health sector management project and health care coverage for specific groups such as soldiers, prisoners and refugees. In the year 2002 the Slovenian parliament endorsed the introduction of excise “sin” taxes on tobacco and alcohol, part of which has been allocated to preventing non-communicable diseases and health promotion. The capital investments in primary health care facilities are provided by the self-governing communities’ budgets. The law obliges self-governing communities to provide for all public services at local level and gives them the right to decide locally how much to invest in health. Legal preconditions for fiscal transparency All requirements for the central government budgets, local government budgets and the budget of the Health Insurance Institute of Slovenia are stipulated in one act - the Public Finance Act (PFA). PFA regulates the composition, preparation and implementation of the central and local government budgets, the management of state and municipal property, borrowing of the central and local governments, debt management, accounting and budgetary control. It also covers the extra-budgetary funds, including the two larger social security funds (Health Insurance Institute of Slovenia and the Retirement and Disability Pension Insurance Institute), and the activities of the indirect budget users, stipulating the rules for drawing up and submitting financial plans, cash management, borrowing, issuing guarantees, accounting, submitting annual reports and budgetary control. The main focus of PFA is on financial compliance but it also includes provisions for efficiency and costs effectiveness of budget expenditures. All laws and regulations must be accompanied by costs estimates and all major budget proposals must include costs-benefit analyses. The PFA includes provisions for the budget proposal and the financial statements of the central and local governments, but there are no specific legal requirements for transparency in budget management and reporting. The transparency of extra-budgetary funds is provided by the Law on Public Funds, adopted in February 2000, which creates a consistent framework for public funds management and reporting. Fiscal reporting to the public and the legislature in Slovenia are done on a monthly basis. Ministry of Finance prepares a monthly bulletin which covers the cash flows of the central government budget, local communities, and social security funds. According to the results from the Open Budget Questionnaire Survey [13] Slovenia is a country which has been developed an open budget system in a relatively short period of time. The Slovenian institutions responsible for budget matters issue both timely and detailed in-year reports and a mid-year review of the budget. Similarly, the executive’s year-end reports are timely — available within six months after the end of the fiscal year — and provide detailed comparisons of actual outcomes and enacted levels. Audit reports are released within 12 months of the end of the fiscal year. Furthermore, reports that track implementation of audit recommendations are issued as well. According to the same survey data Slovenia engages in practices that encourage public and legislative involvement. It provides information that highlights policy and performance goals, including performance indicators and, for some programs, performance targets. Further, it provides supplementary materials, such as a non-technical “citizens budget” and a pre-budget statement, that can help facilitate a better understanding of the budget and its policies. The budget documents[14]are available to the public in the Official Gazette of the parliament and most of them are available in Internet as well. According to the IMF report on the state of fiscal transparency in Slovenia [15] the budget documents provide a fairly comprehensive and detailed coverage of all fiscal activities. The Slovenian Act on the Access to Information of Public Character creates conditions for transparency of public information (including budget spending), which combined with the openness of the budget process creates good preconditions for exercising public control and budget spending monitoring. According to the PFA provisions the local governments shall set up adequate forms of internal budget control in accordance with the detailed instructions laid down by the minister responsible for finance. Existing mechanisms of public participation There are mechanisms for direct and indirect public participation in the health care issues in Slovenia. Citizens may participate directly in public debates held in the parliament on the health care plan and in regional-level committees of insured people, which have been established to provide an opportunity for population to participate actively in planning and managing the health insurance system. Citizens may also participate indirectly through their representatives in the Parliament, in the Economic and Social Council of the Parliament, in the HIIS assembly and council, in the Councils of Health Care Institutions and in health-related associations and non-governmental organizations.[16] III.3. Brief overview of local government websites of Ljubljana, Budapest and Dublin Ljubljana The Ljubljana’s local government website [17] has one main shortcoming – it is prepared in Slovenian language only. Nevertheless (if you can read Slovenian) it is consumer oriented and users’ friendly. There is a special section with a Catalog with Information of Public Interest (Katalog informacij javnega znacaja [18] ). It consists of a circumstantial list of all local government employees with their contact details, including phone numbers and e-mails for direct communication. The information continues with a list of all regulations and documents, which might be of use for the citizens of this municipality. In respect of fiscal transparency the municipality pastes on its website all available financial reports and related statements, so the budget revenue and spending issues could be clear and transparent. Budapest The website of Budapest local government [19] contains information in both – Hungarian and English language. The website navigation is easy. The information in English is well structured. The most interesting information regarding fiscal transparency on local level is in separate document - Legal and financial information 2003. According to that document: - Regulations concerning the operation, the organizational structure, the duties and powers of the Municipality of Budapest are laid down in Act No. LXV of 1990 on Local Governments (referred to as the Act on Local Governments) and in General Assembly Decree No. 7/1992 (III. 26.) that concern the Rules of Procedure of the Municipality of Budapest, enacted on the basis of the authorization granted under the aforementioned law (referred to as the Rules of Procedure). - To be able to fulfill its duties, the Municipality of Budapest is 1) provided with own assets; 2) subsidized from the central budget and 3) entitled to collect revenues of its own, of which the most important is the right to impose local taxes. - The municipal duties and powers are vested in the local governing body, the General Assembly. The General Assembly holds ordinary meetings once a month, but extraordinary meetings may also be convened in cases specified in the Rules of Procedure. Citizens may be present at the public sessions of the General Assembly, as audience members. - The General Assembly has one public hearing a year where citizens and representatives of local organisations may pose questions of public interest or make recommendations. A citizens’ forum may be convened to handle specific issues of public interest; to make preparations for major decisions affecting the capital; to provide direct information to the citizens and social organisations; and to solicit their opinion. - In order to make its work more transparent and easy for the citizens of Budapest the General Assembly has a Committee of Civilian Organisations and a Social Connections and Information Committee. Concerning fiscal and budgetary transparency issues there are four additional documents on the Budapest local government website: Regulation of the Financial Management, Budgetary Management between 2000-2003, Auditing, The Financial Strategy of the Municipality. Dublin The Dublin City Council website [20] is the best one among the three websites reviewed. It is excellent organized and most important it presents fiscal information in a very transparent way. It also consists of a clear explanation[21] on: - What is Freedom of Information? The Freedom of Information Acts, 1997 & 2003 provide that every person has the following legal rights: - Freedom of Information and Dublin City Council The Act requires Dublin City Council to respond to requests from the public for information held by the Council. - Dublin City Council obligations Acknowledge receipt of the request within two weeks Make a decision on the request within four weeks, eight weeks in certain cases. If Dublin City Council does not respond within four weeks the decision is deemed as refusal and the requester can proceed to the review stage. - Available Assistance Manuals Dublin City Council has two publications available to help citizens in understanding the structure of the organization and the types of information held. Section 15 Reference Book – Guide to the Structure, Functions, Powers, Duties, Services and Records of Dublin City Council. Section 16 Information – Rules, Procedures, Practices, Guidelines, Interpretations and Precedents used by Dublin City Council for the purposes of Decisions, Determinations or Recommendations - Who is the Information Commissioner and how to contact him? The Office of the Information Commissioner is an independent office with powers to review decisions made by Dublin City Council. Where a review has been undertaken, the Information Commissioner's decision is binding on the parties concerned subject to appeal to the High Court on a point of law. The site gives the address where appeals in writing may be made to the Information Commissioner. Regarding the reporting procedures the website presents the last reports 2000, 2001, 2002, 2003. It is also mentioned that all local authorities are obliged to prepare and adopt an Annual Report in relation to the performance of its functions. The draft of this report is submitted to all members of Dublin City Council, and is officially published once they approve it.[22] Conclusion The local governments’ websites of Ljubljana, Budapest and Dublin give access to fiscal information to a great extent (including annual reports, fiscal plans, etc.) If some information is not available on the websites it is clearly mentioned how to find it or who is the council employee responsible for it thus citizens and civil organizations could ask directly. IV. FORMS OF PUBLIC PARTICIPATION IN THE BUDGET PROCESS
Participatory Budgeting in Porto Alegre — Promoting Responsive Government
PETS studies have been implemented in Uganda, Tanzania, and Ghana since 1996 to quantify the problems of 'asymmetric information' in public spending manifested in the leakage of public funds. In these three countries the surveys confirmed that leakage of non-wage public funds seriously obstructs social service delivery. [23]
National Health Accounts National Health Accounts (NHA) is an internationally recognized framework that measures and tracks the use of total - public, private (including household), and donor –health care expenditures in a country. It does so by offering a transparent and consistent way of describing health expenditures in terms of financing sources and the application of their resources. In other words, health accounts track the flow of funds from one health care dimension to another, such as from the Ministry of Health to each health provider and health service program. Expenditure data is presented in a standard set of tables that follow a user-friendly format intended for use by country policy makers and other stakeholders, including civil society and donor representatives. Designed as a policy tool, NHA, first and foremost, improves the capacity of governments to manage their health care systems. The estimates generated during an NHA exercise can help policymakers to determine the level of efficiency of the health care system, and identify areas of under- or over-spending. Time trends in NHA can demonstrate the impact of policy initiatives on public and private spending and productivity of the sector. The standard NHA expenditure tables allows comparisons across countries that can help to create valuable knowledge about how health care resources can be used most effectively. Since NHA requires health care spending information from all health sector stakeholders it provides an overview of the entire health care system, which consequently allows NHA to serve as a budget spending monitoring tool as well. NHA for individual countries were originally developed using ad hoc methods, but over the past 10 years the methodology has become more standardized, particularly in the Organization for Economic Cooperation and Development (OECD) member countries. Increasingly, developing countries are seeking to use and adapt standard methods to generate reliable and valid estimates of NHA. Donor agencies, development banks, and international technical agencies support this effort, believing that better information yields better policy. V. THE ROLE OF THE CIVIL SOCIETY IN BUDGET MONITORING PROCESS Consistent with the movement toward more open government, citizens around the world have become increasingly concerned with obtaining access to accurate, comprehensive, and timely information on their country’s budget. That is why since the 1990s, civil society organizations have begun to play a larger role in the budget process in some countries. Many NGOs started carrying out independent research and training with the aim of building public awareness on budget issues. NGOs are involved in budget analysis, providing comprehensive information to the public and to the media and often enabling them to comment on budget proposals and to monitor expenditures. NGOs also carry out surveys to compare budget transparency across countries, thus putting pressure on governments to improve budget systems. In recent years, many NGOs specialized in budget analysis offer training for other civil society organizations. An analysis of Warren Krafchik [24], Director of the International Budget Project [25], shows that the role of civil society in the budget process has been recently expand from the so called “applied budget groups”. The majority of those groups have emerged and operate within the non-profit, NGO/CBO sectors. However, several groups have been successfully established within an academic environment and a couple of groups have been initially supported from the public sector. The leaders of these groups include activists, academics, former government leaders, business people and consultants. The vast majority of budget groups operate independently of their country government and political parties. They work at either or a combination of national, state and local/municipal levels and strive to achieve timely, accessible and accurate analysis. Each group focuses on a wide variety of topics and uses several methodologies. Some groups focus on simplifying the budget for popular consumption, some develop expertise in training, while others develop analytical or advocacy expertise or some combination of these. Most of the groups monitor every stage of the budget process, but often concentrate their interventions on a specific stage. In many countries those interventions have enabled broader understanding and participation in the budget process and more effective oversight. In Mexico, the work of FUNDAR in the 1990s halted the use of a Presidential secret account that did not require the approval of Congress. In Israel, the work of ADVA pressured the government to retract changes to the welfare benefits that would have been prejudicial to the country’s poorest families and elderly citizens. In South Africa, the work of IDASA led to an improvement in a new basic financial management bill through the inclusion of clauses on Virement [26] and sanctions for mismanagement. In Russia, the work of Volgo-Vyatsky contributed to eliminating a corruption-prone arrangement that allowed firms to pay a portion of their taxation in goods and services. [27] In Uganda, Uganda Debt Network has established Poverty Action Fund Monitoring Committees (PAFMCs) in 12 districts, which are participating in the monitoring process in their districts. PAFMCs are voluntary civil society groups participating in monitoring of Poverty Action Fund (PAF), performance of the budget, anti-corruption campaign and advocacy for accountability and transparency. The committees are composed of persons selected from the civil society sections including women, youth, people with disabilities, men, religious leaders, and the elderly. In order to make monitoring more participatory, UDN introduced community based monitoring and evaluation system approach. Through this the communities are engaged in continuous monitoring and evaluation of government programs and pertinent intervention activities. So far, there is no doubt, UDN model of PAF monitoring is hailed as a success story. [28]
Krafchik points out that the increased civil society budget activities are often complemented by greater independent budget oversight within legislatures and by the increased critical coverage of budget issues in the media. A partnership between civil society and legislatures is often the starting point for the development of local independent budget work. In many cases, civil society has been able to build or enhance research expertise that is lacking in legislatures, while legislatures can offer access to key moments in the budget process that are inaccessible to civil society. However, while in some countries parliaments have enthusiastically embraced alliances with civil society groups in order to provide a check on executive government dominance of the budget process, in others they have strongly resisted civil society involvement in budget making. This has occurred on different levels, depending on the type of participatory budgeting program. In some cases, governments have undertaken detailed consultation with budget advocacy groups, while legislatures are bypassed until the legislative review phase. As noted elsewhere, in Uganda this has reached the point where representatives of the Uganda Debt Network now sit as members of ministry of finance budget formulation committees. Some parliamentarians there resent the prominent role of civil society and may see this as way of governments trying to undermine their role as an independent source of political power and as a means of keeping the executive branch in check.[33] The most important limitation faced by civil society however is the restrictions in the access to budget information. The free access to information is crucial for public participation and monitoring of budget spending. In case of presence of political will communication technology could be extremely helpful here. Good example in that direction is Peru, where in February 1999 the Ministry of Economy and Finance launched an Internet Portal of Fiscal Transparency, which provides free access to extremely detailed information on the budget and especially on the budget execution through connection with the System of Integrated Budget Management that includes all sectors even defence and national security.[34]
[1] James E. Alt, David Dreyer Lassen and David Skilling, Fiscal Transparency and Fiscal Policy Outcomes in OECD Countries, James E. Alt, David Dreyer Lassen and David Skilling, early draft of paper prepared for presentation at the 2001 Annual Meeting of the Midwest Political Science Association, Chicago, IL, 2002. [2] Poterba, James, and Jurgen von Hagen (eds.), Fiscal Institutions and Fiscal Performance, NBER, University of Chicago Press, 1999. [3] http://www.u4.no/document/health/budgettransparencyintro.cfm [4] Tsuru Kotaro, Senior Fellow RIETI, Transparency of Government (Part 2); Transparency in Fiscal and Monetary Policies (2003.7.22), Economics Review, 2003 [5] Kopits, G. and J. Craig (1998), "Transparency in government operations", IMF Occasional Paper No. 158. [6] http://www.imf.org/external/np/fad/trans/code.htm#code#code [7] Update of the Code of Good Practices on Fiscal Transparency, IMF, March 23, 2001 [8] OECD Best Practices for Budget Transparency, PUMA/SBO(2000)6/FINAL, OECD, 15-May-2001 [9] Gaál P. Health care systems in transition: Hungary. Copenhagen, WHO Regional Office for Europe on behalf of the European Observatory on Health Systems and Policies, 2004. [10] Local governments are responsible for the delivery of utilities, education, health, and other services employing 63 percent of public sector workers in 3,170 municipal bodies and 13,422 local budget institutions. [11] Report on the Observance of Standards and Codes - Hungary, Fiscal Transparency, IMF Fiscal Affairs Department, April 2001. [12] From 2001-2002 budget years the budget of the social security funds have become an integral part of the parliamentary budget process, and are included as separate attachments to the annual budget law. [13] The Open Budget Questionnaire is a measurement tool to evaluate public access to budget information from the perspective of civil society organizations. It also covers other budget process issues in order to explore ways of improving public understanding and involvement in the budget. The questionnaire is developed by the International Budget Project, which is part of the Center on Budget and Policy Priorities, Washington, D.C. The Center is a non-profit research and policy institute that conducts research and analysis of government policies and the programs and public policy issues that affect low- and middle-income households. [14] The budget documents include - the budget memorandum; the proposed central government budget with explanations; the planed sales of central government assets for the next year; the proposed financial plans for the Health Insurance Institute, Retirement and Disability Pension Insurance Institute, Public funds and agencies established by the central government [15] Republic of Slovenia: Report on the Observance of Standards and Codes - Fiscal Transparency Module, IMF country report N 02/115, June 2002. [16] Tit Albreht, Marjan Cesen, Don Hindle, Elke Jakubowski, Boris Kramberger,Vesna Kerstin Petric, Marjan Premik and Martin Toth, Health Care Systems in Transition -Slovenia, vol. 4, N3, 2002, European Observatory on Healh Care Systems, 2002 [18] http://www.ljubljana.si/zamescane/kijz.html [19] http://english.budapest.hu/engine.aspx?page=localgov [20] http://www.dublincity.ie/ [21] http://www.dublincity.ie/your_council/our_organisation/freedom_of_information.asp [22] http://www.dublincity.ie/your_council/our_organisation/finance/index.asp [23]
For more information about the use of Public Expenditure Tracking
Systems, see: [24] Can civil society add value to budget decision-making? A description of civil society budget work, Warren Krafchik - The purpose of the paper is to examine the expanding contribution of civil society organizations to public budgets in developing countries. It provides examples of civil society budget activities in a variety of country contexts in order to measure the value of this work to public budgeting. [25] The International Budget Project assists non-governmental organizations (NGOs) and researchers in their efforts both to analyze budget policies and to improve budget processes and institutions. The IBP is part of the Center on Budget and Policy Priorities, located in Washington, D.C. The Center is a non-profit research and policy institute that conducts research and analysis of government policies and the programs and public policy issues that affect low- and middle-income households. [26] Virement refers to the extent to which a government department can spend in a way that is not congruent with budget plans without reverting back to the legislature for approval. [27] Can civil society add value to budget decision-making? A description of civil society budget work, Warren Krafchik. [28] Monitoring of Poverty Action Fund: Lessons from Uganda, Basil Kandyomunda, Deputy Executive Director, Uganda Debt Network, 2003 [29] http://www.spb.org.ru/design/strategy/pages/eng/activities.htm [30] http://www.internationalbudget.org/resources/library/Poland.pdf [31] http://www.dcfpi.org/7-29-02bud.htm [32] Opening Budgets to Public Understanding and Debate. Results from 36 Countries, Pamela Gomez, Joel Friedman, Isaac Shapiro, The International Budget Project, October 2004. [33] Strengthening Participation in Public Expenditure Management: Policy Recommendations for Key Stakeholders, Policy brief No. 22, Jeremy Heimans, OECD DEVELOPMENT CENTRE 2002. [34]
The Budgetary Process in Peru: Is a Participative Budget Too Risky?,
Claudia Gonzales del Valle, Eduardo Morón, Universidad
del Pacifico, Department of Economics, July 2, 2001. |
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the right to access official records held by public bodies listed
in the Act; and