1. LEGISLATIVE OVERSIGHT AND GOOD GOVERNANCE
The Role of Parliament in the Budget Process
Rick Stapenhurst, World Bank Institute

2. OVERVIEW OF PRESENTATION
Introduction – Good Governance + Legislatures
The Budget – an Introduction
The Budget Cycle + The Legislature (Ex-Ante)
The Budget Cycle + The Legislature (Ex-Post)
Conclusions

3. Reminder : Core Functions of Legislatures
The Legislative Function
Passing Laws
Participation in Public Policy Making
The Oversight Function
Holding Governments to Account
The Representative Function
Representing Constituents

4. Parliament + Good Governance (Abridged)
Legislative
Function
Oversight Function
RepresentativeFunction
Openness + Participation
XXXXXX
Gov’t Account-ability
Public Policy Dev’t

5. Reforms for Improving Governance and Combating Corruption
Civil Society Oversight
Monitoring
Access to Information
Freedom of the Press
Economic Policy
Deregulation
Privatization
Competition Policy
Good Governance
Parliamentary Oversight
Public Hearings
Legislative Oversight
Inspector General/Anti-
Corruption Agency
Financial Management
Comprehensive Budget
Transparency
Procurement Reform
Independent Audit
Good governance
Civil Service Reform
Pay
Meritocracy
Client Information
Rule of Law
Independence from Executive
Upgrade Staff Training and Laws
ADR Mechanisms
Customs Reform
Tariff Simplification
Professionalization
Reduce Discretion

6. Part 1. The Budget

7. Definition of the budget
“It’s got a lot of numbers in it.” (George W. Bush)
An itemized summary of estimated or intended expenditures for a given period along with proposals for financing them.
“Power of the purse”. Government can only spend what the legislature has approved – and is accountable to the legislature for such spending

8. Heart of Executive-Legislative Relations : The Budget Process

9. Part 2 : Parliament + the Budget Cycle (Ex-Ante)

10. Legislative changes to the budget proposed by the government
Source: OECD (2002)

11. Enabling conditions Powers of amendment Timing
The role of committees: choice of committees, time, location of amendment powers
Independent research capacity

12. Survey of amendment powers

13. Amendment powers Three broad clusters of powers:
Unfettered (US, Nigeria, Sweden)
Balanced budget (francophone countries)
Otherwise restricted (“reductions only”, executive approval)
But: variance of powers does not fully explain variance in amendments

14. Timing of the budget
International experience suggests that a minimum of three months is required for meaningful legislative analysis and scrutiny (OECD Best Practices).

16. Role of parliamentary committees
Legislative committees are the ‘engine room’ of the legislature.
There are several models:
A single budget committee makes decisions without input from other committees.
In a two-tier system the budget committee decides on expenditure totals and sectoral committees departmental budgets.
There is no budget committee, but sectoral committees scrutinize departmental budgets.

17. Access to information
Legislative decision making needs to be based on comprehensive, accurate, appropriate and timely information.
In a number of countries, the budget document itself contains little narrative that outlines the policies underlying tax and spending proposals.
Many budgets do not sufficiently relate expenditures to policy objectives.
Parliamentary budget offices are important sources of independent expertise.

18. 3.4. Independent research capacity: the options

19. Part 3 : Parliament + the Budget (Ex-post)
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.

20. Conceptual Approach: Key Actors and their Relationships
PUBLIC FINANCIAL ACCOUNTABILITY
Parliament
Accountability
Relationship
Reports
Public
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.
Auditor General
Executive
Examines

22. Interaction with parliament
relationship between parliament and the audit institution varies between systems.
In the court model tradition, parliament uses audit information for a formal vote on the execution of a budget.
In the Westminster tradition there is no formal vote on budget execution, and parliamentary review serves primarily to generate recommendations for improving public spending.
In a number of countries supreme audit institutions have established parliamentary liaison offices and accompany audit related work of parliament on an ongoing basis.
More recently, many supreme audit institutions have also developed a more ad hoc advisory function.

23. Role of parliamentary committees
A few legislatures do not consider audit findings in detail, but most parliaments use committees to do so.
In some legislatures the same committee that is responsible for approving the budget is also tasked with considering audit reports (eg. Germany, New Zealand)
Another option that is closely linked to the auditor general model of public audit is to use a dedicated public accounts committee for the scrutiny of audit findings (e.g. most Commonwealth countries).
Other parliaments involve sectoral committees, such as those responsible for health, education or defense, to scrutinize relevant audit findings (e.g. the United States).

24. Public Accounts Committees: Common Features:
Average size = 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.
Common features relate more to size, and composition than to performance or practices.

25. Who is normally called as witness?

26. Public Accounts Committees: Success Factors (1)
Power to formulate recommendations/publish conclusions
Power to select issues w/o gov’t direction
Focus on financial probity rather than on policy issues
Power to investigate all past/present expenditures
Power to call witnesses
Examine the budget of the Auditor General
Require ministers to appear
The WBI study found that there was / is general agreement on a framework of powers and practices for an effective PAC. These powers and practices have also been the ones employed by the most successful PACs:
Ÿ        1. Having a broad scope (meaning looking at road conditions rather than traffic accidents, not just doing additional detailed work);
Ÿ        2. Power to select issues without government direction (and also to initiate enquiries);
Ÿ         3. Power to report conclusions, suggest improvements and follow up on these;
Ÿ         4. Strong support from the legislative auditor, members of parliament, and research staff that creates a unity of purpose about PAC work.
Relative impact of success factors also related to fact that the PAC, as an institution, has evolved less in the newer commonwealth countries – this is linked to issues that are discussed in the “Future Directions / Challenges” section

27. Public Accounts Committees :Success Factors (2)
Keeping transcripts of meetings
Adequate preparation
Follow-up procedures
Non-partisan
Independent + Reliable information
Media Coverage
The WBI study found that there was / is general agreement on a framework of powers and practices for an effective PAC. These powers and practices have also been the ones employed by the most successful PACs:
Ÿ        1. Having a broad scope (meaning looking at road conditions rather than traffic accidents, not just doing additional detailed work);
Ÿ        2. Power to select issues without government direction (and also to initiate enquiries);
Ÿ         3. Power to report conclusions, suggest improvements and follow up on these;
Ÿ         4. Strong support from the legislative auditor, members of parliament, and research staff that creates a unity of purpose about PAC work.
Relative impact of success factors also related to fact that the PAC, as an institution, has evolved less in the newer commonwealth countries – this is linked to issues that are discussed in the “Future Directions / Challenges” section

28. Current Situation in the Commonwealth: Constraints:
Highly partisan climate
Government dislike of legislative oversight
Lack of media/public involvement
Lack of public trust in parliament/ parliamentarians
Partisan climate in PAC can deter the committee from developing consensus. This could compromise PAC investigations, deliberations, and the determination of priorities
No government really likes to be put under a microscope and to have their accounts reviewed – let alone by a committee that is often chaired by the opposition. Good relations between the PAC Chair and the Leader of Government business / Whips / Speaker will be important for effectiveness of PAC – even if the government is not fully supportive of increased legislative oversight.
Closed PAC sessions are counter productive to enhancing accountability – and are NOT in the “public interest”. Some decisions or issues may need to be discussed in camera but the majority of sessions, and information, should be made available to the public – this linked with dual aims of increased participation & transparency which supports improved accountability.
Public service needs to see itself as accountable not only to the Minister for actions, but to the public through parliament. Changes in mindset of public service are not easy to achieve.

29. Conclusions/Questions
Does the legislature play an oversight role in budget formulation in your countries?
Does the legislature play an oversight role in budget execution in your countries?
Is the legislature’s role effective?
How could it be improved?