LEGISLATIVE SCRUTINY OF PUBLIC EXPENDITURES M. Mozammal Hoque Financial Management Sector Board April, 2003

OVERVIEW OF PRESENTATION Pillars of National Integrity System and Financial Accountability Cycle Conceptual Approach to Parliament’s Role in Ex-Post and Ex-Ante Control Current Situation Future Challenges Recommendations This diagram is meant to illustrate the INTER-RELATIONSHIPS between the governance actors involved in public financial accountability. This reinforces the mosaic of issues that come together in the “public interest” Some have shown this as an accountability chain, with the Exec / AG / and PAC each being a link in the chain. But this triangular diagram stresses the inter-relationships necessary to strengthen the system of accountability. Hence the relationships are more than linear. Parliament has an important role given its connection to both the Executive, the Auditor General , and via committees and MPs, the public. The arrows depict the more traditional relationships, but as argued later, the relationship between the PAC and the AG should be much more cooperative, and therefore 2-way flow.

National Integrity System Pillars of National Integrity System Sustainable Development National Integrity System This diagram is meant to illustrate the INTER-RELATIONSHIPS between the governance actors involved in public financial accountability. This reinforces the mosaic of issues that come together in the “public interest” Some have shown this as an accountability chain, with the Exec / AG / and PAC each being a link in the chain… But this triangular diagram stresses the inter-relationships necessary to strengthen the system of accountability. Hence the relationships are more than linear. Parliament has an important role given its connection to BOTH the Executive, the A-G, and via committees and MPs, the public. The arrows depict the more traditional relationships, but as argued later, the relationship between the PAC and the AG should be much more cooperative, and therefore 2-way flow. Political Will Parliament Admin. Reforms The Judiciary Civil Society The Media Watch Dog Agencies* The Private Sector Economic Reforms *Anticorruption agencies, Supreme Audit Institution, and Ombudsman's Office

Public Financial Accountability People Reports Accountability Relationship PAC PEC PUC SCM C&AG Audit GOB Parliament Donors Media Public Financial Accountability

Building Trust: Capturing the Promises of Accountability Parliament Performance reports Audits Redress Mechanisms Media Long-term Goals Improved Services Confidence Trust Intermediate Objective Transparency Disclosure Redress

Financial Accountability Cycle: 3 Questions What information can Oversight Agencies obtain about the Government’s activities; how relevant, accurate, timely and comprehensive is the information? How well are the Oversight Agencies able to analyze the information, and develop action-oriented conclusions? What kind of response are Oversight Agencies able to generate from the executive?

Conceptual Approach - Fiduciary Obligations - 1 Composition of Committees – various patters Committee chair and membership Accountability Relationship with Executive Committees used to hold Executive accountable PAC, Finance Committee and Public Undertakings Committee deals with use of public funds other Standing committees deals with policies and results Auditor General/Court of Accounts Assists, and Reports to Parliament Parliament’s role in approving the allocation of public funds – also known and the ‘power of the purse’ – is supported by Parliament’s role in reviewing the use of those funds it approved. Useful to think of the budget as a CYCLE and not an event – parliament approves the budget / the Executive spends / Parliament reviews expenditures, and in some cases, the performance of the programs the funds were spent on… The public accounts, as prepared by the AG, have been the main document used by PAC in carrying out its mandate. PAC cannot carry out its mandate if it does not receive timely and accurate reports from the AG. In some countries there are separate committees for public undertakings. This committee mostly reviews the accounts and also performance of the public enterprises.

Conceptual Approach: Fiduciary Obligations - 2 Parliament holds ‘power of the purse’ and obligation to hold the Executive accountable. PAC oversees use of public funds and resources by Executive Does this by examining public accounts Courtesy: Rick Stapenhurst, WBI

Conceptual Approach: Fiduciary Obligations - 3 PAC work often dependent on the Auditor General’s reports Effectiveness depends on follow-up Report of PAC – Should it be discussed by the Parliament Key issues : Status of PAC, Relationship with the AG, Capacity, Resources and Working Practices,

Current Situation : Common Features Average size of 11 MPs Size reflects party in legislature. 2/3 of Chairs from an opposition party; and 1/3 from the governing party Prime focus on Public Accounts & reports of AG. PAC reports generally available to the public. Generally, PAC hearings are open to the public and media. Courtesy: Rick Stapenhurst, WBI

Current Situation : Success Factors* A broad scope Power to select issues w/o gov’t direction Power to report, suggest improvements, and follow-up Strong support from AG, MPs and research staff that creates a unity of purpose about PAC work. * Based on recent World Bank survey Courtesy: Rick Stapenhurst, WBI

Current Situation in the Commonwealth: Common Challenges Highly partisan climate Government dislike of legislative oversight Lack of media involvement Lack of a strong ethical base for public service Courtesy: Rick Stapenhurst, WBI

Future Directions and Challenges Some PACs deal primarily with specific audit findings and transactions PAC evolution parallels growth in mandate of legislative auditors into value for money PACs not always prepared to handle broader scope of the work/more complex accountability arrangements of modern governments Courtesy: Rick Stapenhurst, WBI

Future Directions and Challenges Improve capacity of Auditor General Improve research and secretariat Capacity building of PAC members Better use of sub-committees Better involvement of public & media Better procedures for follow-up Strengthen International linkages

Integrated Financial Management and Control Approach Public Accounts Committee Parliament: Oversight Functions Public Undertakings Committee Committee on Estimates Ministries Standing Committees on Min. External Audit Ministry B Ministry A Ministry C “the dogmas of the quiet past are inadequate to the stormy present……….As our case is new, so we must think anew and act anew” Abraham Lincoln Former US President The Finance Minister of Bangladesh who is an accountant and serving his third term as Finance Minister said about 90% of reform or creating ideas for increasing the capacity development always comes from the politicians and not from the permanent civil servants. There is a need of CORORDINATION-LINKAGES-INTEGRATION Identify change agents from Ministers/Secretaries Prepare Strategic /Perspective Planning for Ministries Give a Corporate look to Ministries Focus on outputs than inputs/Measurement concept Address human infrastructure of Ministries Move from red taped file to a technology based system Submit annual performance report to Parliament Link with broader administrative reforms Chief Executive Officer Principal Accounts Officer Chief Accounts Officer Go for Pilots and Roll out