ROLE OF THE FINANCE COMMITTEE OF PARLIAMENT

IN THE GOVERNMENT BUDGET PROCESS AND

THE CONTROL OF CORRUPTION

A Presentation By

Mike Stevens

Capacity Building Unit

Africa Region

World Bank

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ROLE OF PARLIAMENTARY FINANCE COMMITTEE

Setting the scene Central importance of Government budget Parliament’s role in:

authorizing taxes

approving expenditures

monitoring performance

scrutinizing results

And in:debating new policy

approving new laws

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HOW CAN THIS ROLE BE PERFORMED?

Daunting taskTechnical language of public finances

Obscure budget conventions

Size of budget documents

Interpretation of fiscal reports

Understanding government financial statements

Identifying the important issues.

Global trend towards greater fiscal transparencyOECD best practice

IMF code

Developing country best practice

Tools for understanding budgetsThe Bank’s 3 level framework

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THE BANK’S 3 LEVEL FRAMEWORK

A well performing budget system functions effectively at 3 levels.

Level 1 -- Macro: A budget which sets and achieves realistic fiscal targets.

Level 2 -- Strategic: A budget which allocates resources according to the government’s objectives.

Level 3 -- Micro: A budget which resources projects and programs in a way that enables them to be executed efficiently and effectively

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THE GOVERNMENT BUDGET CYCLE

Executive Low EngagementLegislature

High EngagementLegislature

Governmentinitiatespreparation ofannual budget byfinance ministriesissuing "callcircular" to lineministries,consistent in theexpected revenue.

Reviews macro-economic frameworkof budget.

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Executive Low EngagementLegislature

High EngagementLegislature

Finance ministryscrutinizesspending proposalsand assembles draftbudget for Cabinetapproval

Budget submittedto Parliament fordebate andapproval.

Poorly informeddebate on budgetestimates

Has well informeddebate on budgetestimates.

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Executive Low EngagementLegislature

High EngagementLegislature

Spendingdepartmentsimplement programsand projects asmoney is released byfinance ministry.

Approve additional in-year budget estimates

Receives monthlyreports on aggregaterevenue spending..

Financial year endsand spendingdepartments draw uptheir accounts whichare consolidated byfinance into agovernment financialstatement.

Actively debates newpolicy proposals.

Conducts hearings onperformance of mainministries andagencies..

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Executive Low EngagementLegislature

High EngagementLegislature

Accounts areaudited bySupreme AuditAuthority (SAI)

Audit Reportsubmitted toParliament.

Perfunctoryexamination offinancial statementand audit findings.

Critical examinationof financialstatements and auditfindings. Review offollow-up action.

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SHOULD PARLIAMENT TRY TO CHANGE THE BUDGET?

• Contrasting experience of countriesRubber stamping legislature

Scrutinizing legislature

Transforming legislature

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HOW CAN PARLIAMENT HELP FIGHT CORRUPTION?

• Ensure committee meetings are open

• Examine tax proposals

• Conduct hearings on main revenue agencies performance

• Take audit reports seriously, and support budget of Supreme Audit Institution

• Scrutinize public movement

• Focus on performance

• Support regular corruption surveys

• Stiffen the resolve of the finance ministry.

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SUMMARY OF ACTIONS TO STRENGTHEN PARLIAMENTARY SCRUTINY

Demand more transparent and readable budget documents.

Seek publication and regular updating of the Government's fiscal framework and underlying macroeconomic assumptions.

Focus on strategic allocations and major programs rather than details of submitted budget.

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Require monthly reports of aggregate revenues and spending.

Require annual reports from main spending ministries and agencies, ensure they contain performance information, and scrutinize.

Hold government accountable for end-year financial statement.

Support Supreme Audit Institution, scrutinize its report and monitor follow-up.

Keep committee hearings open