Fiscal Transparency Challenges: County, Kenya, Africa Presentation to ICPAK PFM Conference September 2014 Fiscal Transparency Challenges: County, Kenya, Africa Jason Lakin, Ph.D., Country Manager, IBP Kenya

Why Should We Care About Transparency? Good Practice? Yes Important for accountability? Of course Signals fiscal credibility to creditors? Sure But Those Are Not The Most Important Reasons 2

The New Public Finance is About Dialogue Kenya’s 2010 constitution reconstituted the budget process as a long conversation Starts in January with the Division of Revenue (how much for each level of government?) In February, we debate the ceilings by sector (how much for each sector?) In May, we debate the priorities within each sector (how much for programmes, etc.?) In June, we finalize the agreement That is six months of talking! And then….

We keep talking! Finance bill (revenues) starts in June, can run to end September Discussions within sectors at both national and county level that lead into the BPS (February) At county level, Annual Development Plan is tabled in September, kicking off conversation about priorities, which runs to February So…we are basically meant to be talking all the time

The budget conversation is now a core part of the democratic discourse All key actors are present (executive, legislature, public, judiciary) Multiple opportunities to give views as we move from overall resources to within sector Conversation continues after approval with implementation reports, budget reviews, and evaluation, which should all lead back into formulation

So when we talk about implementation challenges, we are saying we don’t know how to talk to each other: We aren’t using a common language We aren’t sharing key information We aren’t making consistent, logical arguments We aren’t listening or responding to each other

And these are indeed some of the challenges Common language: classification, chart of accounts, PBB narrative Key information: state corporations, quarterly implementation data, Division of Revenue Consistent arguments: failure to observe agreed ceilings, prior agreements Listening/responding: meaningful forums, documenting inputs, providing feedback

Challenge 1: Common Language Let’s start with Programme-Based Budgets Improving, but still form over substance Narrative is not linked to allocations Programmes do not have clear objectives; subprogrammes do not have any Programmes are meant to focus on outputs, but many are thin veils over “recurrent/capital” input split Not disaggregated sufficiently or aligned with line-item budgets for clarity about spending

Common Language? Hardly Poor narrative means we cannot understand each other But also no clear written classification guidelines (e.g., what is development?) to unite language Lack of common use of Chart of Accounts IFMIS not geared toward different budget programmes at county level causing confusion Result?

Tower of Budget Babel

Challenge 2: Key Information We cannot hide critical information and still have meaningful discussions Example I: State corporations receive over Ksh 350 billion from the budget (2012/13) Previously, there was an Annex on state corporations tabled with the budget Never comprehensive, but no longer available; SCs also don’t feature in PBB Difficult to get state corporation annual reports and financial statements to understand their budgets and the fiscal risks they pose Concern as counties move to set up county state corporations

More Key Information Missing Budget discussion doesn’t start and end with formulation Budget implementation reports are critical for review and input into next year’s allocations PFMA requires counties to produce and publish quarterly reports within 30 days of end of quarter, yet they are not COB is producing some, but not consistent across counties, not timely

Still More Key Info: Division of Revenue Ministries have failed to release adequate information about their spending Treasury/CRA released incomplete cost basis for calculations (2012/13 line item basis is opaque) Conditional grants are divided between DOR and other parts of the budget randomly and not guided by transparent framework Low quality debate, limited understanding of costs, functions and mechanisms of sharing

Challenge 3: Consistent Arguments We cannot discuss with people that keep changing their positions Budget process expects ceilings to be set in March by National and County Assembly Then proceed to discuss within sector priorities Yet Assemblies are not respecting ceilings; some CFSPs did not even include ceilings Even Treasury broke ceilings and then Parliament, instead of restoring, accepted (e.g., Ministry of Health) and further increased; narrative doesn’t match figures Budget Committee did not follow its own report on issue of L5 hospital grant

Challenge 4: Listening and responding When we ask people for their views, we have to listen and respond Few forums with advance notice or data; sometimes no data even at the forum There are few documents at national or county level that acknowledge inputs and how these were used MPs used to describe in detail feedback they received, but no longer (9 counties visited, but only general feedback: “concerns” about security, agriculture); Nyeri Assembly had annex of submissions received

What is the solution? Has been a lot of training and capacity building Some has been good, some has been poor, but change will only come when there is more demand from citizens Professionals have a key role to play because they understand what is supposed to happen and why and can make strong arguments Also have status and can make consequential noises

Putting it all in perspective How does Kenya compare to other countries in the region? Not at the top, not at the bottom Let’s look at two sources of data: Open Budget Survey and Open Budget Tracker Allow for national comparison only; some sub- national work is underway with Institute of Economic Affairs

18 What is the Open Budget Survey 2012? An objective, comparative survey that evaluates: public access to national budget information (95 questions); 8 key documents assessed opportunities for public participation in budgets (12 questions) the strength of formal oversight institutions – national legislatures and external auditors (16 questions). Based on international good practices developed by the IMF, OECD, INTOSAI, and the IBP Survey is the fourth round; 2015 underway now 26 countries from Sub-Saharan Africa and 4 from North Africa are included in the 2012 Survey

19 Key Finding #1: Major Gaps in Budget Transparency Worldwide Governments publish less than half of the required budget data (Average score 43/100). For Sub-Saharan Africa, the average score is lower, 31/100. Only 23 of the 100 countries provide their citizens with comprehensive budget information (South Africa and Uganda) 21 countries do not publish the Executive’s Budget Proposal (eight are in SSA) Worst performers on the continent include Equatorial Guinea, Benin, Chad, Niger, and Zambia

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21 Key Finding #2: Positive but Slow Trend Towards Improvement 20 percent increase in budget transparency in 40 countries with comparable data between 2006 and Kenya has generally stagnated, but some improvement likely in 2015 (budget documents online and timely, etc.) Africa has many champions: –Liberia: 3  42 –Uganda: 32  65 –Burkina Faso: 11  23 (Francophone West Africa more generally) –São Tomé e Príncipe: 1  29

22 Key Finding #3: Few Opportunities for Public Participation Some promising innovations exist in this area, including: public hearings; client surveys; social audits; citizen audit requests systems; fraud hotlines

Key Finding #4: Oversight Institutions Are Ineffective In Practice Oversight institutions have moderate levels of formal powers, but struggle to exercise these in practice. LEGISLATURES –Inadequate research capacity and limited time to review the budget –Limited powers to approve and monitor changes to the enacted budget during budget execution SUPREME AUDIT INSTITUTIONS –Lack of independence –Limited resources 23

The New OBS Tracker An online database that presents monthly updates on budget documents released by governments. Reports the publication status of eight key budget documents in one of three ways: 1.Published 2.Produced for Internal Use Only 3.Not Produced

OBS v. Tracker The Open Budget Survey covers 102 countries, while the OBS Tracker pilot covers 30 (including some of the lowest scoring countries in the Open Budget Survey 2012). OBS Tracker data can be used to assess whether individual budget documents have been published in a country. OBS Tracker data cannot be used to assess the country’s overall budget transparency levels – the Open Budget Survey is the appropriate source for such information. But Tracker gives more up to the minute information on fewer items Some preliminary results from Africa:

Africa OBS Tracker Results (July data) CountryPBSEBPEBCBIYRMYRYERAR Publicly AvailableNot Produced Produced for Internal Use GhanaNPPW 710 KenyaPW IU PW 602 Sierra LeoneIUPW IUHCPW 602 TanzaniaPW NP PW 620 DR CongoPW NPIUNP 521 MaliPW NPIUNP 521 SenegalPW NP 530 NigeriaNPPW NPIUPWNP 431 Cote d'IvoireIU PWNPPWNPPWNP 332 NigerHC IUNP IUNP 242

Observations Africa is increasingly digital (most documents are on websites now) Kenya performance is relatively good, but could be better In Kenya’s case, very consistent with OBS: two key documents not published to international standards (Mid-Year Review and Year-End Report) Suggestive that our conversation about budget implementation is still weak (compared to Ghana, South Africa)

Thank you