How open are budgets in OGP member countries and what are the trends?

This post is the second in a short series that GIFT will be running to provide ideas for the 51 member countries currently preparing their next Action Plans. The first post discussed the steps OGP countries should take in their next Action Plans to increase fiscal transparency and participation. A third post will look at how well countries have implemented the OGP commitments on fiscal transparency in their first Action Plans.  The posts draw on a series of GIFT papers, ‘Fiscal Transparency in Open Government Partnership Countries, and the Implementation of OGP Commitments: An Analysis’, prepared for successive meetings of the OGP-Fiscal Openness Working Group, and on GIFT case studies of public participation in fiscal policy.

 

So how open are budgets in OGP member countries?

In summary, there are some outstanding examples amongst OGP countries of rapid increases in fiscal transparency in recent years, although the average score and pace of improvement are low, and some OGP countries have gone backwards. It is notable that many of the rapid gains came from publication of documents that governments were already producing for their internal use and for donors, but not making publicly available.

The best way to measure budget transparency is to draw on data from the Open Budget Survey (OBS) compiled by the International Budget Partnership (IBP) and used to compile country scores on the Open Budget Index (OBI). The OBS is the most comprehensive cross-country data on current practices with respect to fiscal transparency.[1] There have been five OBS surveys since 2006, with country coverage increasing from 59 countries in 2006 to 102 countries in 2015. The OBS is also the source of data on whether a country meets the minimum entry requirements for budget transparency for the OGP – which are the publication of the Executive’s Budget Proposal and the Audit Report.

So what does the Open Budget Survey tell us?

First, 29 of the 47 OGP countries are categorized in the OBI as providing insufficient budget information to the public. These 29 OGP members scored 60 or below in the 2015 OBS. Four of those countries provide minimal budget information, the second lowest category. In terms of OGP regions, average OBI scores were as follows: Africa 55; Asia 62; Europe 59; the Americas 58.

Second, on average, the pace of improvement in budget transparency is slow. Across all OGP countries in the Survey there was an average increase of only +2 on the OBI between the 2012 and 2015 surveys – which is lower than the +3 improvement on average for all countries in the OBS.

Third, progress is very uneven across OGP members. Figure 1 shows the distribution of absolute changes in OGP member country scores from each country’s first inclusion in the OBS to the 2015 survey, by size of change and number of countries.

OGP_post_Murray_01

 

 

Fourth, there are some outstanding examples amongst OGP countries of rapid increases in fiscal transparency. The maximum possible score on the OBI is 100, so the following increases in scores (drawn from the same data as in Figure 1) represent major step-increases in the level of budget transparency.

  • In Africa: Malawi +37; Liberia +35;
  • In the Americas: Honduras +31; Dominican Republic +39; El Salvador +25;
  • In Asia: Mongolia +33; Azerbaijan +21; Indonesia +17;
  • In Europe: Georgia +32; Tunisia +31; Bulgaria +18; Albania +13; Croatia +11.

Fifth, there are also some notable examples of backsliding on fiscal transparency amongst OGP members in the most recent period.  Notable reductions in OBI scores (falls of 10 or more on the OBI between the 2012 and 2015 surveys) include: United Kingdom (-13), Korea (-10), Slovak Republic (-10), and Honduras (-10). And there are four OGP members that, in the 2015 OBS did not meet the minimum fiscal transparency eligibility criteria for OGP membership in terms of the availability of the Audit Report: Malawi, Tunisia, Liberia, and Spain.

The OGP member with the greatest improvement between the 2012 OBS and 2015 OBS was Tunisia, which increased its score by 31 points by publishing the Executive’s Budget Proposal and Citizens Budget. Romania (+28) and the Dominican Republic (+22) both saw substantial improvements to their OBI score by improving the comprehensiveness of the Executive’s Budget Proposal. Peru, the Philippines, Sierra Leone, Italy, Malawi, Georgia, and El Salvador all improved by 10 points or more.

How well do OGP countries score on public participation in budgeting, and on the strength of legislative oversight?

The average public engagement score in 2015 for all 102 countries surveyed was only 25 out of 100, while for OGP member countries the average was 36. This means that OGP members are significantly more open than non-members, on average. However, in absolute terms a score or 36 means that on average OGP countries included in the OBS only provide weak opportunities for the public to participate in the budget process.

Table 1 shows the average participation scores by OGP region for OGP members.

OGP_post_Murray_02

 

The stand out performer on public participation across all 102 countries in the 2015 OBS was South Korea, with a score of 83. This is in sharp contrast to Korea’s record of public consultation in developing and implementing its first and second OGP Action Plans. The  IRM reports for this country found that it was unclear how, if at all, the government engaged the public in the development or implementation of the Action Plans.

Other OGP members that scored above 60 for public participation in the 2015 Survey were Norway (75), Brazil (71), USA (69), the Philippines (67), South Africa (65), and New Zealand (65).

With respect to the strength of legislative oversight, there is a very wide range of scores across countries, although, as illustrated in Table 2 below, there is limited regional variation.

OGP_post_Murray_03

 

Notable findings with respect to legislative oversight are that 19 OGP countries (40% of all OGP members) do not have a specialized budget research office attached to the legislature, and in 22 OGP countries (47%) there was a weak or no quality assurance system for audits.

So what steps should OGP countries take in their next Action Plans to increase fiscal transparency and participation?

As noted, many of the rapid increases in OBI scores achieved by a number of OGP members in recent years have come from publication of budget documents that were already produced for internal use and for donors, but were not being made available to the public. Simply deciding to publish such reports and documents would be a very effective and low-cost step that many countries should consider to rapidly increase transparency. The first post in this series looked in-depth at this and other specific actions that OGP members should be considering now to increase transparency and public participation in budgeting in their next Action Plans. The final post in this series will analyse how well countries implemented the fiscal openness commitments in their first Action Plans.

 

Murray Petrie

GIFT Lead Technical Advisor

 

[1] See ‘Defining the Technical Content of Global Norms: Synthesis and Analytic Review Revised Phase 1 Report for the GIFT Advancing Global Norms Working Group.  http://fiscaltransparency.net/wp-content/uploads/2012/03/GIFT-Defining-the-Technical-Content-of-Global-Norms-Synthesis-and-Analytic-Review.pdf

The Role of Fiscal Transparency in Combating Corruption – Joint Statement to the International Anti-Corruption Summit

GIFT FT_anticorruption

The Role of Fiscal Transparency in Combating Corruption

Joint Statement to the International Anti-Corruption Summit

May 13, 2016

 

Fiscal transparency is essential to fight corruption. Our experience, and that of many others like us, has shown that fiscal transparency reduces opportunities to misuse public money undetected and increases the likelihood that those who do so are held to account. While it is not the only factor needed to tackle corruption, it is absolutely a necessary condition. It incorporates some of the biggest sources of corruption in the public sector, including public procurement, tax administration, and the selection and location of major public infrastructure projects. The International Anti-Corruption Summit hosted by the United Kingdom this week provided an important moment to spread this message, and we welcome the Summit Final Statement, which both recognizes the importance of this factor in the fight against corruption and strongly encourages countries to work to strengthen their fiscal transparency.

 

Fiscal transparency means that governments publish high-quality information on how they raise revenues, borrow, spend, invest, and manage public assets and liabilities. Fiscal transparency, as we define it, covers fiscal activities that occur both inside and outside the government budget process, including quasi-fiscal activities undertaken outside the government sector by public corporations or the central bank. It also includes public reporting on the past, present, and future state of public finances and clarity about the structure and functions of government, fiscal policy intentions, public sector accounts, and fiscal projections.

 

Recently, cases of corruption in many countries have made national and international news. What these stories have not emphasized sufficiently is that the scandals had been uncovered largely due to the public availability of data on government finances. In each case, government audit agencies, local civil society watchdogs, or the media analyzed data on government finances to identify wrongdoings.

 

As we have seen in these cases and in our general experience, fiscal transparency is most effective in checking official acts of corruption when it is complemented by a system of effective checks and balances that includes institutional mechanisms for enforcement, investigation, and sanctions. This requires the presence of engaged legislatures, independent supreme audit institutions, a free press, and a robust civil society.

 

Government budgets are at the core of development and represent the most powerful tool at hand for meeting the needs of citizens. Whether it’s about health, education, or pensions, or about funding the activities of regulatory agencies, the most well-meaning public policy has little impact until it is matched with sufficient public resources, and then those resources are used effectively to provide public services. In this context, even beyond its potency as an anti-corruption tool, fiscal transparency helps governments communicate the economic and social impact of fiscal decisions, as well as how they plan to use limited public resources and the tradeoffs involved, thereby building trust with their citizens.

 

The good news is that we know what it takes to advance fiscal transparency. International standards are clear, shortcomings in budget transparency are known, and technical assistance and peer-learning mechanisms are available. This was acknowledged by governments at the International Anti-Corruption Summit through the recognition in the Summit Final Statement of the High-Level Principles on Fiscal Transparency, Participation, and Accountability that have been issued by the Global Initiative for Fiscal Transparency. We are encouraged by the commitments governments made to strengthen fiscal transparency, ensure legislative oversight of budget processes, and empower supreme audit institutions – all critical steps in ensuring that public resources are not wasted through misuse, including corruption.

 

Signed by

Federal Budget Secretariat, Ministry of Planning, Budget and Management, Brazil

Budget Office of the National Treasury, South Africa

Technical Secretary of Development Planning and Budget, Paraguay

Department of Budget and Management, Philippines

What steps to increase fiscal transparency and participation should OGP countries take in their next Action Plans?

OGP GIFT

This post is the first in a short series that GIFT will be running to provide ideas for countries preparing their next Action Plans. Two further blogs will look at how well countries have implemented their OGP commitments on fiscal transparency, and how transparent and participatory budgets and budget processes currently are in OGP countries. The posts draw on a series of GIFT papers, ‘Fiscal Transparency in Open Government Partnership Countries, and the Implementation of OGP Commitments: An Analysis’, prepared for successive meetings of the OGP-Fiscal Openness Working Group, and on GIFT case studies of public participation in fiscal policy.

Fifty-one countries are currently preparing their next OGP National Plans of Action, so this is a great time to look at what commitments they should consider on budget and fiscal transparency.
Budget transparency is a key area: it is one of the four requirements for membership of the OGP; and fiscal transparency commitments made up around one third of all the commitments in the first 51 Action Plans.
‘Fiscal transparency’ can sound dry and technical, something for the ‘experts’ rather than of interest to ordinary citizens.
Nothing could be further from the truth! Fiscal transparency is essential to fight corruption, which predominantly hurts the poor and marginalized. Transparency and broad-based public deliberation – as opposed to lobbying by elites behind closed doors – are important determinants of whether public infrastructure such as hospitals, schools, roads, electricity and water supply are well planned, well built, and well maintained; public services are of good quality and generally deliver what the public wants; and tax officials are honest in their dealings with taxpayers.
public_infrastructure
The importance of effective, accountable and inclusive institutions is also recognized in the UN’s 2030 Agenda for Sustainable Development, while the Addis Ababa Accord on the Third International Conference on Financing for Development established in its action agenda that transparency and equal participation in the budgeting process will be increased.

 

But aren’t OGP countries already transparent and open in how they manage fiscal policies?
No, they are not. Over 60% of the 47 OGP countries in the 2015 Open Budget Survey (OBS) were rated as providing ‘insufficient budget information to the public’. And the rate of improvement is very slow – in fact the average increase in budget transparency between the 2012 and 2015 OBS was even lower for OGP members than it was for non-members. Average OBS scores for public participation across the budget cycle are even lower – much lower – than the scores for transparency. Further details on levels and trends in budget transparency and public participation will be in a subsequent blog.

 

Countries should develop their OGP Action Plans in a much more open and participatory way.
In developing their next Action Plans countries should create more opportunities for meaningful public participation in the design and implementation of fiscal policies over the whole budget cycle, as well as in the delivery of public services and the construction of public investment projects.
In doing so OGP members should put into effect the GIFT Principles of Public Participation in Fiscal Policy as well as follow much more closely the OGP requirements for public participation in the development and implementation of Action Plans than has generally been the case to date.
Mexico and the UK provide interesting examples of how the process of Action Plan development can be made more participatory over time. Mexico set up a three-part governing system for its first Action Plan, headed by a tri-partite commission, the STT, led by the Ministry of Public Administration, the Federal Institute for Access to Information and Data Protection, and a coalition of CSOs. However, the first Mexico Action Plan went through two phases, and the initial Action Plan submitted in September 2011 lacked significant civil society participation. A second ‘expanded’ plan was made in close collaboration with civil society and released in early 2012.
In the UK, the first Action Plan was developed by government with very little public input (as was the case for most cohort 1 countries). The second Plan 2013-2015 was co-created with civil society over 12 months, and was intended to be a model of OGP principles and processes for developing an Action Plan. Recommendations made by the UK Civil Society Coordinators’ after the Plan was completed included that civil society should form a network to engage government; that government and CSOs should agree a process to develop the plan; that lead OGP officials should connect relevant policy officials with relevant CSOs to form working groups; and that both government and CSOs have responsibility for expanding group of stakeholders involved.

 

What are some of the outstanding fiscal transparency and public participation commitments in the first generation of OGP Action Plans?
A good way to answer this is to look at ‘OGP star commitments”: commitments that are measureable, have clear relevance to OGP goals, and that were assessed by IRM researchers to be moderate to high impact and to have been substantially completed or completed. There were 74 star commitments relating to fiscal transparency in the first 51 IRM reports, comprising 20% of all the fiscal transparency commitments in those Action Plans.
Examples of fiscal transparency star commitments include:

  • Brazil: implement the Land Management System to publish information on public lands.
  • Canada: introduce mandatory reporting of revenues from extractive industries.
  • Croatia: publish three Citizens’ Guides: on annual and semi-annual state budget execution, and on the annual budget proposal.
  • Ghana: publish in-year budget execution reports, and simplified budget guides, and hold consultative budget meetings with CSOs.
  • Israel: MOF to establish a central Unit for Government Service to the Public to set guidelines and standards to improve service quality across government.
  • Italy: ‘follow the money’, a web portal that contains data on spending by all government agencies.
  • Jordan: publish the annual reports of the audit bureau and the anti-corruption commission.
  • Liberia: conduct post-contract award audits of government contracts with companies in the oil, mining, forestry and agriculture sectors.
  • Macedonia: introduce a citizen portal for feedback on public services.
  • Philippines: introduce policy on transparency of extractive industries, and publish EITI report.
  • United States: expand EITI transparency; and introduce a range of initiatives to make federal expenditure more transparent, including on procurement.

What are some of the leading international examples of public participation in fiscal policy?
It is instructive to look outside the OPG to some of the new and innovative practices being implemented around the world to engage the public much more directly in discussing fiscal policies and/or monitoring how well they are implemented in practice.
Brazil’s Public Policy Management Councils: more than 50,000 on-going (bi-) monthly councils, at all levels of government, in which officials and civil society representatives deliberate and decide on new budget policies and monitor implementation.
Canada’s public consultations on new revenue or spending initiatives: systematic public consultations on new fiscal policy proposals, such as new infrastructure projects or new tax and spending proposals, through a range or mechanisms, with public inputs published.
Croatia’s Legislative Oversight: Parliament’s Finance and Central Budget Committee, that oversees all stages of the budget cycle, has up to six external non-voting members. The Committee conducts public hearings in which testimony is heard from the external committee members.
Kenya’s pre-budget consultations: the Ministry of Finance holds public hearings around the country during budget preparation, and there is a further two week window for public consultation on the Budget Policy Statement before it is submitted to the legislature.
Korea’s Advisory Committees of external experts and CSO representatives: Advisory Committees provide inputs both to the setting of sector ceilings, and to the allocation to programs within sector ceilings. All budget programs are subject to evaluation every 3 years and external experts and CSOs are involved in all evaluations.
Mexico’s school infrastructure program: Boards of officials, parents and local community representatives decide how to spend funds under a federal program to improve infrastructure in deprived rural schools.
The Philippines Bottom Up Budgeting: local Poverty Reduction Action Teams of officials and CSOs throughout the country identify projects to be funded by the participating national agencies from the national budget.
South Africa’s social monitoring pilots: citizen based monitoring of the quality of public service delivery through community perception surveys, discussions at community meetings, and development of community scorecards.
These are all examples of emerging good practices for OGP countries to emulate in their action plans.

 

What are some of the key general areas where OGP member governments, legislatures and Supreme Audit Institutions, and CSOs and activists should now be considering action to increase budget transparency?
The first point is extremely important: many OGP countries could achieve rapid increases in budget transparency just by publishing documents that are already produced for use within government. This is a matter of political will, and of citizens demanding information that they have a right to.
Based on data from the 2015 OBS, budget reports that were produced for ‘internal use’ but not published as at 2014 were as follows:
a. Pre-Budget Statement on fiscal strategy and priorities for the next budget: 4 OGP countries produced this for internal use only (Chile, Dominican Republic, Indonesia, and Sierra Leone).
b. Mid-Year Review of budget implementation: 4 OGP countries produced this for internal use only (Kenya, Macedonia, Sierra Leone, and Trinidad and Tobago).
c. The Year-End Report on how the budget was implemented in comparison to the original budget: 1 OGP member produced this for internal use only (Albania).
d. The Audit Report: 1 OGP member produced this for internal use only (Liberia).
A number of OGP countries also publish documents but do so too late for them to be considered ‘publicly available’ according to OBS standards of timeliness. From the 2015 OBS, 4 countries published the Pre-Budget Statement too late, 2 countries published a Citizens’ Budget too late, 1 country published its Mid-Year Review too late, and 1 country published its Audit Report too late.

Second, the 4 OGP members that do not meet the minimum fiscal transparency requirements for OGP membership should give priority to publishing the Audit Report. Malawi and Tunisia do not produce an Audit Report, while Liberia produces one for internal use only. Spain produces an Audit Report, but publishes it too late to be considered publicly available.

Third, those OGP members that have gone backwards on fiscal transparency in recent years should give priority to decisively reversing this trend. These include Macedonia (a change of -19 between the 2012 and 2015 OBS), Ukraine (-16), and Bosnia and Herzegovina (-7).

Fourth, there are some very important budget reports that can be produced and published with relatively little effort – such as a Citizens’ Budget (not published in 12 OGP countries at the time of the 2015 OBS), and a Mid-Year Review of budget implementation (not produced in 21 OGP members). Examples of OGP commitments to increase public understanding of budgets include:

  • Honduras: create a portal on the Secretariat of Finance’s web-site devoted to fiscal education (to complement the Citizens’ Budget).
  • Liberia: develop a platform that provides regular budget updates to all citizens via SMS and associated technologies through various local languages; and provide periodic support to rural radio stations to broadcast the messages of the Open Budget Initiative.
  • Paraguay: build capacity among citizens to monitor public sector budget management by explaining the general budget proposal in plain and accessible language and creating citizen access to budget information on indigenous beneficiaries and investment made.
  • The Philippines: create a People’s Budget interactive web site.

 

Fifth, transparency of spending on the delivery of core public services should be increased, and more direct input enabled from service users on their needs and on their perceptions of the quality of services. Examples of Action Plan commitments in this area include:

  • Costa Rica: strengthen the National System of Service Audits through a promotional campaign on its functions and the channels for citizen complaints and suggestions.
  • Dominican Republic: publish data on public complaints at the level of individual government agencies.
  • Indonesia: publish local service delivery-level budgets in health and education.
  • Macedonia: create a portal for citizen feedback on public services.
  • The Philippines: institutionalise social audits.

 

Outside the OGP, the World Bank’s BOOST tool for public expenditure analysis is a new data tool that allows users to trace and analyse budgets for public services down to the points of service delivery – where a country’s IT system contains sufficiently detailed data. For example, in Moldova, BOOST enables users to drill down on spending to the level of individual schools and universities to see how budgets are allocated and actually spent, by who, and whether funds are reaching the areas of greatest need.

Six, commitments should enable citizens to participate more in the planning and delivery of public investment projects. Examples include:

  • Honduras: opening up citizen participation in the monitoring of public procurement processes.
  • Mexico: building a public, open and interactive geo-referencing platform that allows citizens to track public resource allocation as well as the results of federal spending and public works.
  • Ukraine: special citizen panels to be created to monitor the design and implementation of public infrastructure; and Open City platforms in 18 local authorities allow citizens to report problems with local infrastructure.

More generally, commitments to strengthen public procurement are in many Action Plans. Those for which the IRMs reported reasonable implementation progress include Brazil, Croatia, Georgia, Hungary, Indonesia, Mexico, Moldova, Paraguay, Philippines, and Uruguay.
Seven, key oversight institutions should be strengthened. Legislative committee budget hearings should be opened up to the public, and consideration given to setting up an independent research office to advise the legislature on budget issues; the independence and resourcing of the Supreme Audit Institution should be ensured; and social auditing should be introduced or extended e.g. CSO monitoring of the quality of public services, as described above in South Africa.
Finally, countries should also:

  • Clearly demonstrate how each commitment in its Action Plan will advance open government. Many commitments in first Action Plans lacked relevance to OGP: they were about ‘good government’ or ‘e-government’ rather than open government.
  • Specify each commitment more carefully using SMART criteria, and create a clear boundary between existing policies and new commitments. The Philippines first Action Plan and the second UK Action Plan (where the template for each commitment included a section on progress to date to more clearly define what was new in the commitment) provide some good examples of well-specified commitments.
  • Consider some commitments framed in terms of outcomes rather than intermediate processes e.g. increase the country score on the OBS (one of Kenya’s OGP commitments), or align commitments to the achievement of specific UN SDGs, an approach being pursued by Mexico in the development of its third Action Plan.
  • For each commitment, designate the lead agency and the official responsible, as well as the CSO(s) working with government (as was done in the second UK Plan).

GIFT stands ready to assist countries with the design and implementation of their OGP fiscal transparency commitments. The OGP-Fiscal Openness Working Group, which is OGP GIFT FOWGcoordinated by GIFT, has since 2013 been providing regular venues for OGP ministry of finance officials and their country counterpart CSO representatives to engage in-depth on topics of common interest, providing a platform for peer to peer sharing and learning, offering access to international good practices, tools, and technical expertise, and supporting OGP members to develop more ambitious fiscal openness goals and commitments. GIFT has specifically offered its assistance to the cohort of countries currently preparing their next Action Plans. Please contact us and let us know what issues you are grappling with in your country or the areas where you could do with some additional technical support.

Murray Petrie – GIFT Lead Technical Advisor

 

Public Expenditure and Financial Accountability – PEFA: Past, Present and Future

pefa_blogpost

 

On April 26-29, the Public Expenditure and Financial Accountability (PEFA) Program convened an important conference and training on the new PEFA Framework 2016 and public financial management (PFM). The meeting, held in Budapest, focused on key priorities and challenges in PFM and the impact of PEFA in the next 5-10 years.

 

The new PEFA 2016 framework is a substantial upgrade from the previous 2011 version, which was largely the same as the one introduced in 2005. PEFA 2016 acknowledges the changing landscape of PFM reforms and the evolution of good practices over the last decade. The new version derives from the analysis of more than 500 PEFA assessment reports from 149 countries, introducing clarification and refinement. The upgrade also benefited from significant feedback from partners, users, beneficiaries, and observers of PEFA during a global public consultation process carried out in 2014, followed by extensive testing during 2015.

 

As part of the conference, GIFT recognized that PEFA is aware of the continuously changing challenges facing the institutions that support sustainable development, including public finance management systems. It is clear that the new PEFA framework could not possibly include everything related to PFM. However, the approach taken by PEFA reflects the awareness of an environment with an increasing number of institutions and networks that are pushing the agenda of good governance, related to PFM.

 

The new PEFA framework clearly addresses in many of its indicators the questions of public access to public finance information and, in some of them, the issue of the quality of information. This means that the new PEFA framework will provide a very valuable source of information related to PFM.

 

The issue of Fiscal Transparency

GIFT commented on the new PEFA framework from the fiscal transparency and public participation stand point. The new PEFA framework clearly addresses in many of its indicators the questions of public access to public finance information and, in a some of them, the issue of the quality of information.

 

In at least 14 of the 31 indicators, the question of the publication of PFM documents is introduced and consistently, the transparency question is related to better scores. This means that the new PEFA framework will provide a very valuable source of information related to fiscal transparency.  What happens with all the documents that contain very important information about the PFM system for which PEFA does not require proactive disclosure?[1]

 

There are two ways to access government information: governments can proactively disclose it, or they can provide access in response to an official information request. For the future, GIFT’s suggestion is that, for these documents an additional analysis could be made: to find out if they are available upon request, it must be considered that a good number of countries now regulate access to information, which can strengthen the very important element of fiscal transparency in the PEFA framework. A new dimension regarding public accessibility to this information upon request, or a parallel analysis to find this out should not be too time consuming or expensive. In any case, PEFA should also look at other instruments that measure fiscal transparency, like the Fiscal Transparency Evaluations of the IMF and the Open Budget Survey of the International Budget Partnership. In few words: complementary diagnosis tools, or a relatively easy to undertake supplementary analysis, could compensate the weak points from a fiscal transparency perspective.

 

The issue of Public Participation

Strategic allocation of resources and efficient service delivery are two of the main goals of PFM systems. Can we address these goals without public engagement, that is, without the inputs and feedback of those affected by the policies?

 

It is the position of GIFT that we cannot do so.

 

The new PEFA framework actually agrees: with respect to some indicators, PEFA also gives a crucial role to public engagement. The new PEFA Indicators contain three pillars that require direct public participation in fiscal policy implementation[2].

 

Indeed, it would be impossible to assess the performance of the procurement systems, without taking into consideration the mechanisms for handling complaints by the losing bidders. By the same token, the performance analysis of a tax extractive system would be incomplete without considering the defense mechanisms for tax payers. Finally, the public is also an important component of the transparency of legislative scrutiny of audit reports (PI-31-4).

 

However, public engagement as a strategic component of government performance is absent in other indicators, such as the performance plans and evaluation for service delivery (PI-8 1 & 4), public investment management (PI-11), budget preparation (i.e. public feedback for some strategic programs, PI-17) and internal (PI-26) and external audits (PI-30).

 

It is true that the range of experience of public participation in fiscal policies is still quite narrow. The members of the GIFT network are working on this. But we can find examples of ways to engage the public in these sectors in some countries.

 

At the same time, how can one assess the quality of the information provided without taking into consideration the opinion of the user/analyst of this information?

 

While public participation received limited attention in the first generation of fiscal transparency standards, it is increasingly accepted that public participation in both the development and implementation of fiscal policies can strengthen accountability for public financial management.[3] In fact, this is a notion in which GIFT strongly believes. Moreover, public participation also helps to improve the performance and outcomes of PFM systems by increasing their efficiency, equity, effectiveness, predictability, legitimacy and sustainability.

 

Pilot supplementary stand-alone PEFA indicator on public participation

In the case of PEFA, the issue of measuring public participation has also been addressed in an imaginative way. GIFT submitted a module designed as an additional indicator, addressing this issue by measuring public participation practices in PFM systems. Although PEFA did not incorporate GIFT’s recommendation as a formal additional program indicator, it agreed to use the participation indicator as part of the country assessments, for country governments willing to participate.

 

The indicator was tested in the field in the Philippines thanks to the government’s willingness to test it and a desk use of the indicator will be applied for South Africa to review the indicator.

 

The basic components of the draft indicator of public participation in fiscal policy throughout the annual budget cycle are the following four dimensions:

  • Budget preparation and legislative approval
  • The design and delivery of public services (that is, in two of the largest sectors)
  • The appraisal and implementation of public investment projects (via a sample of the largest projects)
  • Oversight processes (legislative review and supreme audit institution)

 

Finally, PEFA could also take advantage of other diagnosis that are focusing more directly on the issue of public participation, like the OBS developed by the IBP. Here again, the questions about public participation have been recently revised in order to make sure that the outcomes reflect good practice.[4]

[1] Some examples include the indicator about public asset management (PI-12), the medium-term perspective in expenditure budgeting (PI-16), or the procurement contract databases or records (PI-24), and the results of internal (PI-26) and external audits (PI-30). The same question refers to Pillar 5, predictability and control in budget execution. In these cases, the PEFA framework refers to records, documentation and data bases to be produced and exchanged within government institutions, but does not elaborate about their disclosure.

[2] The first one is PI-18 (2), which requires direct participation in the legislative scrutiny of the annual budget in order to score an ‘A.’ The second, PI-24 (4) relates to a procurement complaints mechanism. The third element relating to public participation (PI-19) is a new indicator about revenue administration and the treatment of taxpayers: the dimensions of this indicator cover the existence of a right of redress for taxpayers.

[3] This is reflected in the increasing recognition of public participation in international fiscal transparency standards and norms, which, in addition to Principle 10 of the GIFT High Level Principles, includes:

  • The revised Fiscal Transparency Code released by the International Monetary Fund in August 2014, which incorporates direct public participation in budget preparation (Principle 2.3.3).
  • The incorporation of citizen engagement and their ability to influence discussions on budget policy options in Principle 5 of the OECD Principles of Budgetary Governance 2014.
  • Expanded coverage of public participation in the Open Budget Survey implemented by the International Budget Partnership from 2012 (Section 5 of the OBS).

[4] Revised Open Budget Survey Public Participation Indicators (IBP)

a) Public engagement by the executive

  • Formulation and Implementation phases
  • Principles of inclusiveness, timeliness, sustainability, complementarity and transparency are particularly checked

b) Public engagement by the legislature

  • Pre-budget, approval and monitoring phases
  • Principles of inclusiveness, transparency and complementarity

c) Public engagement by the supreme audit institution

  • Audit program design and investigations