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Budget Transparency Accountability and Service Delivery. Parminder Brar Lead Financial Management Specialist World Bank pbrar@worldbank.org East African Budget Transparency and Accountability Conference Dar es Salaam May 23, 2010 . Overview. Background Economic Environment

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slide1

Budget Transparency

Accountability and

Service Delivery

ParminderBrar

Lead Financial Management Specialist

World Bank

pbrar@worldbank.org

East African Budget Transparency and Accountability Conference

Dar es Salaam

May 23, 2010

slide2

Overview

  • Background
  • Economic Environment
  • Budget Transparency Assessments
    • World Bank
    • PEFA
    • IMF
    • OECD
    • IBP
    • Others
  • Service Delivery
  • Key Issues
slide3

Background

  • Our message to our clients, whatever their political system, is that you cannot have successful development without good governance and without the participation of your citizens.
  • We will encourage governments to publish information, enact Freedom of Information Acts, open up their budget and procurement processes, build independent audit functions, and sponsor reform of justice systems.
  • We will not lend directly to finance budgets in countries that do not publish their budgets or, in exceptional cases, at least commit to publish their budgets within twelve months.
                  • Robert B. Zoellick
                  • President, The World Bank Group
                  • The Peterson Institute
                  • April 6, 2011
slide4

Background

  • The new Access To Information policy has greatly increased sharing of documentation.
slide5

Background

  • Open and easy access to the entire World Bank dataset. Foregone revenue of around $ 2 mn. p.a.
slide6

Background

  • Partnered with Google and Microsoft for expanding access.
slide7

Background

Information available, but not easy to visualize

Geo-coding: makes project data more accessible

Visualize project locations and MDGs at country level

slide8

Background

Regions

Countries

Projects

Sectors

slide9

Economic Environment

  • Between 1998-2008, average GDP growth was 5% p.a.
slide10

Economic Environment

  • The recovery is underway.
slide11

Economic Environment

  • Poverty reduction is lower than expected.
slide13

Assessment Criteria: World Bank

  • Several East African countries have the highest CPIA ratings.
slide14

Assessment Criteria: World Bank

  • However their performance in recent years has been mixed.
slide15

Assessment Criteria: World Bank

  • Improvement in Public Sector Management, including PFM has been weak.
slide16

Assessment Criteria: World Bank

  • Question 13 of CPIA: Budget and Financial Management. It has three criteria. It assesses the extent to which there is:
        • (a) a comprehensive and credible budget, linked to policy priorities;
        • (b) effective financial management systems to ensure that the budget is implemented as intended in a controlled and predictable way; and
        • (c) timely and accurate accounting and fiscal reporting, including timely and audited public accounts and effective arrangements for follow up.
slide17

Assessment Criteria: World Bank

  • The methodology for Q.13 is under revision.
slide18

Assessment Criteria: PEFA

Policy Development and Review

Budget Preparation

Audit and Evaluation

Mgmt of Budget Authorizations

Fiscal Reports & Budget Review

Commitment of Funds

Procurement/

Purchasing

Debt and Aid Management

Payments and Receipts Mgmt

Asset / Inventory Mgmt

Payroll Calcs

HR Mgmt

Cash

Management

slide19

Assessment Criteria: PEFA

A. PFM Out-turns

Credibility of the budgetIndicators 1- 4

Deviations from aggregate budgeted expenditure and revenue as well as expenditure composition. Level of expenditure arrears.

B. Key Cross-cutting issues

Comprehensiveness and transparency Indicators 5-10

Coverage of budget classification, budget documentation, reporting on extra-budgetary operations, inter-governmental fiscal relations, fiscal risk oversight and public access to information.

C. Budget Cycle

i.Policy-based budgeting Indicators 11-12

Annual budget preparation process, multi-year perspective in fiscal planning, expenditure policy and budgeting

slide20

Assessment Criteria: PEFA

C. Budget Cycle

ii. Predictability & control in budget executionIndicators 13-21

Revenue administration, predictability in availability of funds, cash balances, debt & guarantee management, payroll controls, procurement, internal controls and internal audit

iii.Accounting, recording and reportingIndicators 22-25

Accounts reconciliation, reporting on resources at service outlet level, in-year budget execution reports, financial statements

iv. External scrutiny and auditIndicators 26-28

Scope, nature and follow-up on external audit; legislative scrutiny of annual budget law and external audit reports

D. Donor PracticesIndicators D1- D3

Predictability of direct budget support; donor information for budgeting and reporting; use of national procedures

slide21

Assessment Criteria: PEFA

  • Around 200 assessments have been completed.
slide22

Assessment Criteria: PEFA

  • Overall PEFA ratings provide a good indicator of PFM performance.
slide23

Assessment Criteria: PEFA

  • Overall PEFA ratings provide a good indicator of PFM performance.
slide24

Assessment Criteria: PEFA

  • Budget Transparency Ratings are possible to calculate using the PEFA dataset (PI 6/8/10/23/24/25).
slide25

Assessment Criteria: IMF

  • The IMF has issued a guideline on resource transparency.
slide26

Assessment Criteria: IMF

  • It has also issued a Code of Good Practices on Fiscal Transparency in 2007. This is based on four pillars:
      • Clarity of roles and responsibilities: Structure and functions of government, responsibilities within government, relations between government and the rest of the economy
      • Open budget processes: Budget preparation, execution, and monitoring; timetable for legislature; realism of estimates and medium-term framework; fiscal sustainability.
      • Public availability of information: Specification of the coverage, detail and timing of fiscal information to be provided to the public.
      • Assurance of integrity: Quality of fiscal data, internal oversight, and external scrutiny.
slide27

Assessment Criteria: IMF

  • There is a manual that accompanies the code.
slide28

Assessment Criteria: IMF

  • Almost 90 Fiscal Transparency ROSC reports have been completed – around a third in developing countries.
slide29

Assessment Criteria: IMF

  • The reports show major weaknesses in fiscal risks, internal audit and other PFM areas.
slide30

Assessment Criteria: IMF

  • The situation in resource rich countries is worse than the overall average.
slide31

Assessment Criteria: IMF

  • The IMF has also specified the SDDS.
slide32

Assessment Criteria: IMF

  • Of the 68 countries that subscribe to the SDDS – there are only two countries from Africa (South Africa and Egypt).
slide33

Assessment Criteria: OECD

  • The OECD specified Best Practices for Budget Transparency in 2002.
slide34

Assessment Criteria: OECD

  • This covered:
    • Budget Reports
      • The Budget
      • Pre Budget Reports
      • Monthly Reports
      • Mid year Reports
      • Year end Reports
      • Pre-election Reports
      • Long Term Reports
    • Specific Disclosures
      • Economic Assumptions
      • Tax expenditures
      • Financial liabilities and financial assets
      • Non financial assets
      • Employee pension obligations
      • Contingent liabilities
    • Integrity, control and accountability
      • Accounting Policies
      • Systems and Responsibility
      • Audit
      • Public and Parliamentary Scrutiny
slide35

Assessment Criteria: OECD

  • Several OECD countries are below the standard.
slide36

Assessment Criteria: OECD

  • For some the time is particularly challenging given their debt to GDP ratios.
slide37

Assessment Criteria: OECD + CABRI

  • CABRI has applied the OECD methodology to Africa.
slide38

Assessment Criteria: OECD + CABRI

  • The budget formulation and approval process is rushed in many countries.
slide39

Assessment Criteria: OECD + CABRI

  • The information provided in the budget documentation by different countries is variable. In several cases it is grossly inadequate.
slide40

Assessment Criteria: OECD + CABRI

  • There is also wide variability in the quality and timeliness of budget reporting.
slide41

Assessment Criteria: OECD + CABRI

  • Off budget spending remains a major challenge across Africa.
slide42

Assessment Criteria: OECD + CABRI

  • The composite index for fiscal transparency is below:
slide43

Assessment Criteria: IBP

  • The Open Budget Index assesses performance on the basis of eight criteria. Budget documentation for citizens remains weak.
slide44

Assessment Criteria: IBP

  • The OBI index is widely reported.
slide45

Assessment Criteria: IBP

  • The OBI index is widely reported.
slide46

Assessment Criteria: IBP

  • Countries have made good progress in improving their OBI scores.

Yemen

Liberia

Uganda

Rwanda

Tanzania

slide47

Assessment Criteria: EITI

  • There are 11 countries that are EITI compliant.
slide48

Assessment Criteria: EITI

  • Tanzania has completed its first Reconciliation Report under EITI:
slide49

Assessment Criteria: EITI

  • This report covers payments received from twelve operations.
  • It assesses that during the period July 1, 2008 to June 30, 2009, the government received a total of $99,457,000 from the mining companies, while the mining companies paid a total of $135,504,000.
  • The total discrepancy between all company payments and all government revenues is $36,000,000.
  • Some of the reasons for the discrepancy are: poor definition of payment flows, particularly production sharing agreements, payment through third parties, particularly those relating to excise duty on imports and fuel levy, and poor government record keeping.
slide50

Assessment Criteria: Fiduciary

  • The TI index is widely reported every year.
slide51

Assessment Criteria: Fiduciary

  • The first comprehensive baseline survey has just been released in Tanzania.
slide52

Assessment Criteria: Fiduciary

  • The key messages from this report are that:
    • Corruption in Tanzania is a serious governance and developmental challenge
    • Service delivery is crippled by corruption and institutional inefficiency
    • Tackling greed and poverty, the root cause of corruption is paramount in the fight against corruption
    • The business environment is undermined by corruption and excessive bureaucracy
    • Improvement in public administration is needed
    • Intensive public awareness campaign is needed
slide53

Assessment Criteria: Fiduciary

  • The results of the three surveys on corruption are the following:
slide54

Assessment Criteria: Fiduciary

  • The issue of funding of elections has also recently been in the news. There are good practices emerging on this across Africa.
slide55

Assessment Criteria: Standards

  • Moving to international standards is part of the move towards improving budget transparency. (e.g. GFS 2001)
slide56

Assessment Criteria: Standards

  • Moving to international standards is part of the move towards improving budget transparency. (e.g. IPSAS)
slide57

Assessment Criteria: Standards

  • Moving to international standards is part of the move towards improving budget transparency. (e.g. PBB)
slide59

Service Delivery

  • High PEFA ratings do not automatically translate into efficient service delivery. Comment from the SA National Treasury was:
  • South Africa has been undergoing major PFM reforms since the 1990’s. It now has a world class PFM system. There is a budget surplus, reduced debt, and increased public spending – up by 9% p.a. in real terms.
  • The 1990s also saw a ‘service-delivery’ disaster for half of the population with a dysfunctional schooling system, poor public health and limited housing.
  • Public Financial Management system reforms are not an end in themselves and although a necessary condition, they are not a sufficient condition for better service delivery.
slide60

Service Delivery

  • Service delivery seems to have worsened while overall PFM scores have improved in SA. IDASA survey in March 2011 showed that one out of 10 individuals was dissatisfied with service delivery compared to four out of ten around five years ago.
slide61

Service Delivery

  • Service delivery remains severely constrained in East Africa. Primary Health Centers without medicines.
slide62

Service Delivery

  • Health facilities without staff.
slide63

Service Delivery

  • Vehicles without maintenance budget.
slide64

Service Delivery

  • Fund flows across multiple levels of government remain constrained.
slide65

Service Delivery

  • Rather than talk about what we do know, we should worry about what we do not know.
  • Rather than focus on what we got right, we should worry about what we got wrong. What we missed; when we did not speak loudly enough; where we self censored – citizens voices yes, but also our own.
                  • Robert B. Zoellick
                  • President, The World Bank Group
                  • The Peterson Institute
                  • April 6, 2011
slide66

Service Delivery

  • The world is a different place.
slide68

Service Delivery

  • Water point mapping has shown that there is a big difference between the theory and the reality.
slide69

Service Delivery

  • Only 54% of water points are functional in Tanzania.
slide70

Service Delivery

  • An NGO has set up a SMS based citizens feedback mechanism.
slide71

Service Delivery

  • The program expects 2.5 million additional people to benefit from this program.
slide72

Service Delivery

  • Third party monitoring of secondary school releases is underway.
slide73

Service Delivery

  • School attendance is being tracked in Uganda.
slide74

Service Delivery

DSM water kiosk survey results released

  • Twaweza visited water kiosks to ask price of water and to collect telephone numbers of kiosk owners and clients
  • Follow up during second round through telephone
  • Results used by regulator and for Bank supervision
slide75

Service Delivery

Dar es Salaam Mobile Phone Survey

Phase 1

  • 550 households in baseline survey
  • Weekly follow up (8-10 questions) using new or existing questions
  • Respondent remuneration
  • Call centre (flexible; works with illiterate respondents and low-end phones; cheap)
  • Response rate > 70%, requiring ex-post reweighting of the sample
  • Part of non-response due to intra-household dynamics and could be reduced further

Phase 2 (May 2011 onwards)

  • Use survey for CAS and project monitoring (and welfare monitoring?)
  • Requires close collaboration between independent monitor and TTLs to identify relevant indicators
slide76

Service Delivery

  • Many good practice examples in Kenya that are having an impact.
slide77

Service Delivery

  • Many good practice examples in Kenya that are having an impact.
slide78

Service Delivery

  • Many good practice examples in Kenya that are having an impact.
slide79

Service Delivery

  • There are also several good examples from Nigeria.
slide80

Key Issues

  • UNECA report on budget transparency states:
    • “In the case of Africa, the best and most suitable lessons on fiscal transparency are those generated on the continent itself. It has been demonstrated that the wholesale adoption of guidelines on transparency from abroad are generally ineffective.”
slide81

Key Issues

  • PFM improvements have to be based on the reality on the ground.
slide82

Key Issue 1: EAC Guidelines

  • There are major reforms underway in PFM laws, budget classification, internal audit, external audit and oversight.
slide83

Key Issue 1: EAC Guidelines

  • Issuing a EAC guideline on budget transparency needs to be considered.
  • Countries in the region need to implement minimum standards regarding release of budget books on the web and adequate and timely reporting.
  • In 2010 WEAMU issued guidelines on the :
      • PFM Act directive
      • Accounting Regulatory Order directive
      • Budget Classification directive
      • Chart of Accounts directive
      • Table of Financial Operations of the State directive
slide84

Key Issue 2: Citizens involvement

  • There is need to fully support increased citizens involvement in the budget execution and service delivery. There are guides available for supporting citizens monitoring of procurement.
slide85

Key Issue 3: Simplified in year budget reports

  • Simplified in year budget reports needs to be produced that facilitates oversight by local communities and oversight committees.
slide86

Key Issue 4: EITI

  • Countries in East Africa need to move to EITI compliant status.
slide87

Key Issue 5: SDDS

  • There is need to provide data in accordance with SDDS timelines.
slide88

Key Issue 6: Parliamentary Review

  • Parliamentary Committees need to be strengthened and provided the capacity for undertaking the review function effectively.