Financing Budget oversight: Problems and Solutions. By Victoria Adekoya

Contents 1 . Introduction 2 . Parliamentary Control and Approval of Budget 3 . Budget oversight Problems 4 . Resource based financial management. 5 . Budget oversight solutions 6 . Spending Review – Solution 7 . Conclusion

1. Introduction The majority of democratic constitutions require appropriations and taxation measures that need to be approved by parliament in order to become effective. parliament must ensure that the revenue and spending measures it authorizes are fiscally sound, match the needs of the population with available resources, and are implemented properly and efficiently. .

Continued The government is directly dependent on majority support in parliament, and the electoral fortunes of parliament and the executive are intertwined .For parliament to fundamentally rewrite the executive budget proposal would most likely lead to a vote of no confidence in the government. Nevertheless, within these boundaries some parliamentary countries play a very effective role in prioritizing spending and monitoring budget implementation.

2 . Parliamentary Control and Approval of Budget Departments are subject to the normal timetables and other requirements of the spending review, estimates, cash limits and other controls, and Vote Accounting Procedures.

3 . Budget oversight Problems 1. Parliament usually does not have sufficient information to play an effective role in the budget process. 2. The executive will always have a greater information base than the legislature and parliament will enter the process at a late stage after roughly a year of departmental negotiations

3 . Budget oversight Problems 3. Parliamentary committees in some developing countries do not have sufficient technical support or even administrative, capacity. 4. lack of willingness of the executives in departments to share the appropriate information with parliament. Obviously, these constraints can be overcome. It is the executive’s responsibility to see to it that parliament does have a sufficient information base to carry out its work In most cases, the problem does not arise from a lack of information (or the executive’s functions would also be in peril) Why the lack of willingness

3 . Budget oversight Problems 5. Parliamentary influence on budgets can lead to a deterioration of fiscal discipline. Can parliament be more disciplined as well as more independent in budgetary matters?.

4 . Resource based financial management. Resource based financial management has been implemented in the UK since 1 April 2001. This was achieved following the agreement of the Parliamentary Committees – Public Accounts Committee, Treasury Committee and Procedure Committee – and Royal Asset to the Government Resources and Accounts Act 2000 in July 2000.The benefits of resource based of financial management is that it translates the Government’s policy and priorities into departmental strategies and budgets. The results are then reported to Parliament. This process assists government in setting priorities for its Spending Reviews.

5 . Budget oversight solutions For Parliament: • Better information on how resources are used to meet objectives and whether taxpayer are receiving value for money. • more and better focused information resulting in better scrutiny of public spending and enhanced accountability to Parliament. For Central Government: • More sophisticated and strategic approach to public expenditure planning and better data to inform decisions on how to allocate resources. • Enhances the current fiscal framework by distinguishing more clearly between consumption and investment. • Contributes to the Modernising Government Agenda.

5 . Budget oversight Solutions For Departments: • Better information on costs, assets and liabilities to assist resource management. • Resource allocation and capital spending linked to delivery of services. • Full costs of activities measured (whether or not there is a cash cost) and costs recorded when they are incurred rather than when they are paid. assets apportioned over the years in which they are consumed in the provision of services. • Incentives to improve management of debtors, creditors and stock (working capital) and fixed assets.

5 . Budget oversight Solutions For Departments: • Better information on costs, assets and liabilities to assist resource management. • Resource allocation and capital spending linked to delivery of services. • Full costs of activities measured (whether or not there is a cash cost) and costs recorded when they are incurred rather than when they are paid. assets apportioned over the years in which they are consumed in the provision of services. • Incentives to improve management of debtors, creditors and stock (working capital) and fixed assets.

5 . Budget oversight Solutions Central management of public expenditure in the UK is concerned with: • Planning, budgeting and Parliamentary authority (through Estimates); • Reporting to Parliament and the public on Government’s use of public resources.

6 . Spending Review - Solution This to deliver better value for money in public services by: setting firm plans for three years ahead, this allows for greater certainty in planning expenditure. separating spending into capital and resource budgets, together with separate control of administration costs. Which ensures essential capital investment is not squeezed out by short term pressures, whilst maintaining tight controls on the costs of administration. allowing departments to carry forward unspent resources form one year to the next through End Year Flexibility. This encourages prudent spending throughout the year and assists better planning.

6 . Spending Review - Solution detailing the outputs and outcomes departments will deliver with the resources available to them through Public Service Agreements and Service Delivery Agreements. setting out departments’ plans to deliver the scale and quality of capital needed to underpin the Government’s proposed improvements in public services in their Departmental Investment Strategies. The public spending framework involves setting firm three-year plans. The most recent Spending Review was completed in 2007 setting out departmental budgets for the next three years 2008-9 to 2010-11. The completes its Spending Review in conjunction with the Law Officer’s Departments and is therefore submitted to HM Treasury.

7 . Conclusion - In conclusion parliament should concentrate its attention on the decisions and allocations between departments and within departments, and allocate more time to scrutinizing the distribution of resources against priorities at a department and sub-department level

7 . Conclusion – Continued While the executive has responsibility for drafting and implementing the budget, the role of parliament is to check that this responsibility is successfully fulfilled. As parliament and its technical staff develop expertise in budget oversight. With sufficient resources in developing countries, parliament can also add value to budget planning and management, they can assist government departments to plan and implement budgets more effectively and efficiently