INTERNATIONAL SYMPOSIUM On THE CHANGING ROLE OF PARLIAMENT IN THE BUDGET PROCESS 8-9 October 2008 Korel Thermal Hotel, Afyonkarahisar, Session Three Accountability of Government and Financial Transparency by Manuela FERREIRA LEITE Professor, Former Minister of Finance, Portugal SIGMA, Support for Improvement in Governance and Management A joint initiative of the OECD and the European Union, principally financed by the EU This document has been produced with the financial assistance of the European Union. The views expressed herein are those of the author, and can in no way be taken to reflect the official opinion of the European Union, and do not necessarily reflect the views of the OECD and its member countries or of the beneficiary countries participating in the SIGMA Programme
Summary The importance of the role of Parliament in budgeting control has been recognised for a long time. Nevertheless, there is a recent interest in promoting public access to information on budget and financial activities, as a means of ensuring that governments submit their reports about the state of public accounts. In order to meet such requirements, deep alterations have been introduced in the budgeting process and in accounting systems. Nevertheless, there is a current tendency to adopt opposite procedures and Parliaments should be fully aware of such strategies. In fact, the heavy pressure to reduce budget deficits has brought about the development of procedures leading both to a deliberate underestimate of public expenditure and to project finance initiatives. The former objectively aim at turning the budgeting process less transparent. The latter practises are decisive instruments in the structural alteration of public sector management but they demand a minimum knowledge of associated charges and risks, which is seldom the case. In the context of present day budget control, these are the major challenges to which Parliaments must respond. Biography Manuela Ferreira Leite, economist, graduated from the Institute of Economic and Financial Sciences. She is a Professor at the Superior Institute of Management from 2005. From 1986-90 Ms Ferreira Leite was General Director of Public Accounting in the Ministry of Finance and held the position of Secretary of State of the Budget from 1990-91 then was Minister of State and Finances. From 1993-95 she was Minister of Education and during the period 1995-99 she was Chair of the Economic Finance and Planning Committee of the Portuguese Parliament. From 2006-2008 Ms Ferreira Leite was a Member of the State Council and she is currently President of the PSD as from May 2008. 2
I. INTRODUCTION Parliament is, par excellence, the institution that exercises control over a government, especially its financial activities. There has consequently been a growing movement worldwide demanding that political power should be exercised in an increasingly open and transparent manner. This movement is manifest in people’s growing desire to be able to get precise, detailed and up-to-date information about their governments’ financial activities. And this is hardly surprising seeing that it’s only with this information that they can evaluate not just a government’s political intentions and priorities but also how it fulfils its obligation to render accounts to parliament. It is obvious that people can only be in a position to understand and evaluate the political decisions that have an impact on their daily lives if they have timely access to this information. The issue only became really important and drew the attention of the international community when a series of financial crises during the 1990s made it clear that a great deal of what was happening was due to a lack of transparency and accountability on the part of governments of countries affected by these crises. In response to these concerns, the International Budget Project-IBP emerged. It was set up in 1997 in order to help a large number of organisations in civil society, journalists, researchers, political leaders and specialists in economic development, who wanted to identify and secure effective financial responsibility in public sectors and a better way to use society’s resources. In that work, attempts were made to evaluate to what degree different governments were willing to make budget documents known and to present relevant information so that policies could be examined, as well as how governments encouraged people and the legislative powers to participate in the budget debate. In the last few years, the IBP has worked with civil society and academic partners in 59 countries to collect comparative information in a questionnaire and analyse the feedback. The questionnaire consists of 122 multiple-choice questions and is the first to offer an independent, non-governmental view of budget transparency of the respective central governments. The questionnaire considers key documents in the budget process that governments should make known during the annual budget circle. I believe the most important of these documents to be: • The macro-economic framework that underpins the planning of the budget. • The budget proposal. 3
• The in-year report. • The mid-year assessment of budget execution. • The end-of-year report • The Auditor’s report This work is not just restricted to examining the type of information that exists, but of information that is publicly available, that is to say, information that each and every citizen can obtain on request from the authorities that issued the document. It was seen that certain countries regularly make documents about the budget available and present very comprehensive information on the whole, as is the case of France, New Zealand, Slovenia, South Africa, the United Kingdom and the United States. Even so, there are also countries that provide important information but could still improve on this, as is the case of Sweden and Norway, especially by means of reports relating to mid-year budget revision. While governments in other countries fail to provide both the public and parliament with information that would allow the wider public to understand the budgets and the policies underpinning them. But the most noteworthy conclusion was that improvement in transparency is limited in most countries and that this depended basically on the willingness of the government to be accountable to its citizens. In fact, it is always possible to improve significantly in transparency, even with few resources and in short periods of time. Apart from this, serious lacunae were found in external audit institutions. In many countries neither executive nor legislative powers seem inclined to use the means available to them to involve and inform people about the budgets planned for them. Besides, governments often fail to make information available to the public, although this information already exists for internal use or even for investors. In other words, transparency and accountability can be improved on if existing information were simply made known to the public at large. This investigation substantiates the suspicion that when governments fail to provide information, it’s more a decision to withhold information than any impossibility or incapacity to produce it. Many countries now make their budget documents available on the Internet. The Internet has the advantage of being an efficient way for the government to make numerous and diverse facts known to interested parties. 4
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