1. The World Bank January 12, 2005 Legislative Oversight Mozammal Hoque Sr. Financial Management Specialist AFTFM The World Bank

2. January 12, 2005 Role of Legislature for Ensuring Accountability  Parliament’s have a constitutional obligation to ensure the fair and effective implementation of the constitution, the laws, policies and regulations through effective, timely oversight  Ensure economic development and poverty alleviation  Ensure accountability for use of public resources  Review the performance of the Government – review government’s accountability for results  Ensure regulatory environment for ensuring financial accountability in the private sector  Carry out investigation on specific issues which affect financial accountability in a country

3. The World Bank January 12, 2005 Conceptual Approach: Key Actors and their Relationships Auditor General Parliament Executive Reports Examines Accountability Relationship PUBLIC FINANCIAL ACCOUNTABILITY

4. The World Bank January 12, 2005 Legislative Systems Presidential System Hybrid System Parliamentary System The French synthesizes both the President and Parliamentary systems and reflects many characteristics of one or other depending on whether the President and parliamentary majority are from the same party. In the presidential system, the legislature is an independent body. For example, the US Congress declare the President budget “dead on arrival” and then put its own budget. However, the President has Veto power for challenging the legislators. In a parliamentary system, the legislature is not as independent as in the presidential system. In a parliamentary system, the executive branch is an agent of the legislature to manage state craft.

5. The World Bank January 12, 2005 Legislative Budget Process Role Characteristics Capacity to amend or reject the executive’s budget proposal and capacity to formulate a budget of its own (USA). This creates the scope for confrontation between the legislature and executive branch of the government. Capacity to amend or reject the executive’s budget proposal, but lacks capacity to formulate and substitute budget of its own – (Germany, Philippine, Poland, Hungary, India). Lacks capacity to amend or reject the executive budget proposal to formulate a budget of its own. Confines itself to assessing to the budget that is placed before it – (South Africa, Israel, Namibia, United Kingdom, Canada) Source: Legislature and Budget Process by National Democratic Institute Budget Making Budget Influencing Budget Approving

6. The World Bank January 12, 2005 Constitutional Role Specific Constitutional Restrictions: - Can only decrease expenditures (UK, Canada, Ireland, France, Ghana) - No net increase in expenditure (Greece) - Government approve any changes ( Korea) -No net increase in expenditures (Italy, Spain) - Constitution in developing democracies are highly restrictive on the legislature. In some cases, the Parliament may be hesitant to use such powers (Malawi). Political Traditions Same political party in control of legislative and executive branches (USA) Vote on the budget is automatically a vote of confidence in the Government (UK, Canada). Coalition Governments (India, Bangladesh, Germany) Constitutional Role and Political Traditions

7. The World Bank January 12, 2005 Influence of Various Forces and Factors Influence of Various Forces and Factors Influence of party in power is common in preparing the budget – For example, in Japan, the LDP plays a leading role in preparing the budget, which reduces the role of the Parliament. The interferences of lobbyist is not uncommon in influencing government policy and may influence budgeting (USA) Influence of donors is common in countries who are dependent on donor’s resources for budgeting to a great extent (Mozambique, Gambia) In some countries, the legislators are not allowed sufficient time to review the budget.

8. The World Bank January 12, 2005 Trends in Parliamentary Review of the Public Expenditures The role of legislature is declining in the OECD countries, but increasing in some emerging economies in Africa ( South Africa, Ghana, Uganda), Latin America ( Brazil, Colombia), countries in transition (Poland, Moldova), etc Executive domination is common in budget preparation but legislatures are developing means for asserting their role in the budget process (South Africa, Uganda, Countries in Transition, Brazil) Many legislature have created an independent budget office responsible to the Parliament (USA) Improved reporting to legislature (countries in transition) Review of performance audit reports (USA, Thailand, etc) Many legislature that are active in the budget process have strong and active committees (UK, Uganda) More resources for the legislative review. The role of legislature is declining in the OECD countries, but increasing in some emerging economies in Africa ( South Africa, Ghana, Uganda), Latin America ( Brazil, Colombia), countries in transition (Poland, Moldova), etc Executive domination is common in budget preparation but legislatures are developing means for asserting their role in the budget process (South Africa, Uganda, Countries in Transition, Brazil) Many legislature have created an independent budget office responsible to the Parliament (USA) Improved reporting to legislature (countries in transition) Review of performance audit reports (USA, Thailand, etc) Many legislature that are active in the budget process have strong and active committees (UK, Uganda) More resources for the legislative review.

9. The World Bank January 12, 2005 Legislators Role – Beyond Financial Accountability  Parliament’s have a constitutional obligation to ensure the fair and effective implementation of the constitution, the laws, policies and regulations through effective, timely oversight.  Parliament has a overall responsibility for promoting good governance and good corporate governance.  Review all Government Strategies including PRSP  Legislators should review the performance Accountability of the Government Ministries and Department (Central Government, State Governments and Local Government Institutions).

10. The World Bank January 12, 2005 Parliament’s Role for Accountability for Results Review Strategic Planning of the Government Review Medium-term Expenditure Framework Review Strategic Planning of Ministries Give a corporate look to ministries Review the budget (inputs), outputs and outcomes Review the performance reports of the ministries Review the broader administrative reforms Make Accountable: Chief Executives of Ministries Secretaries Controllers Budget or Finance Committee Public Accounts Committee Standing Committees for Ministries Oversight Functions Parliament: Guiding principles for success: Facilitate and avoid interfering Creating an environment of constructive dialogue Avoiding confrontation and all parties should work as a team Setting examples for making the executives accountable. Budget Policy Committee Donors Citizens Auditor General Civil Society Watch Dog Group Media Central Bank

11. The World Bank January 12, 2005 Parliament’s Role for Improving Accountability in the Private Sector  More economic activities are carried out by the private sector  General public invests billions of dollar in the capital market based on trust.  Parliament has a role that these investors are not cheated by the powerful sections of the society who controls corporate world by making institutional arrangements in place.  The Parliament should be proactive in playing its role.  Intervention of US Congress is very proactive. Examples- -The Sarbanes-Oxley Act of 2002 - Public Company Accounting Oversight Board

12. The World Bank January 12, 2005 Challenges  Time constraints of Legislators  Confrontational politics in the developing world  Capacity constraints  Capacity of Auditor General  Effective network of organizations  Resource constraints  Checks and balances in the systems  Decentralization  Better involvement of public & media  Better procedures for follow-up  Strengthen International linkages  Ethical standards – “ Ghost in the mustard”

13. The World Bank January 12, 2005 ThailandArgentinaBangladeshUganda Challenges are country specific, depends on the socio political environment and the attitude of the political leadership in the country. Q&A and Discussions