Budget Transparency Accountability and Service Delivery

1. 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

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

3. 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 • We will not lend directly to finance budgets in countries that do not publish their budgets or, in exceptional cases, at least commit to publish their budgets within twelve months.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

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

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

6. Background • Partnered with Google and Microsoft for expanding access.

7. Background Information available, but not easy to visualize Geo-coding: makes project data more accessible Visualize project locations and MDGs at country level

8. Background Regions Countries Projects Sectors

9. Economic Environment • Between 1998-2008, average GDP growth was 5% p.a.

10. Economic Environment • The recovery is underway.

11. Economic Environment • Poverty reduction is lower than expected.

12. Assessment Criteria: World Bank

13. Assessment Criteria: World Bank • Several East African countries have the highest CPIA ratings.

14. Assessment Criteria: World Bank • However their performance in recent years has been mixed.

15. Assessment Criteria: World Bank • Improvement in Public Sector Management, including PFM has been weak.

16. 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.

17. Assessment Criteria: World Bank • The methodology for Q.13 is under revision.

18. 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

19. 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

20. 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

21. Assessment Criteria: PEFA • Around 200 assessments have been completed.

22. Assessment Criteria: PEFA • Overall PEFA ratings provide a good indicator of PFM performance.

23. Assessment Criteria: PEFA • Overall PEFA ratings provide a good indicator of PFM performance.

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

25. Assessment Criteria: IMF • The IMF has issued a guideline on resource transparency.

26. 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.

27. Assessment Criteria: IMF • There is a manual that accompanies the code.

28. Assessment Criteria: IMF • Almost 90 Fiscal Transparency ROSC reports have been completed – around a third in developing countries.

29. Assessment Criteria: IMF • The reports show major weaknesses in fiscal risks, internal audit and other PFM areas.

30. Assessment Criteria: IMF • The situation in resource rich countries is worse than the overall average.

31. Assessment Criteria: IMF • The IMF has also specified the SDDS.

32. Assessment Criteria: IMF • Of the 68 countries that subscribe to the SDDS – there are only two countries from Africa (South Africa and Egypt).

33. Assessment Criteria: OECD • The OECD specified Best Practices for Budget Transparency in 2002.

34. 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

35. Assessment Criteria: OECD • Several OECD countries are below the standard.

36. Assessment Criteria: OECD • For some the time is particularly challenging given their debt to GDP ratios.

37. Assessment Criteria: OECD + CABRI • CABRI has applied the OECD methodology to Africa.

38. Assessment Criteria: OECD + CABRI • The budget formulation and approval process is rushed in many countries.

39. Assessment Criteria: OECD + CABRI • The information provided in the budget documentation by different countries is variable. In several cases it is grossly inadequate.

40. Assessment Criteria: OECD + CABRI • There is also wide variability in the quality and timeliness of budget reporting.

41. Assessment Criteria: OECD + CABRI • Off budget spending remains a major challenge across Africa.

42. Assessment Criteria: OECD + CABRI • The composite index for fiscal transparency is below:

43. Assessment Criteria: IBP • The Open Budget Index assesses performance on the basis of eight criteria. Budget documentation for citizens remains weak.

44. Assessment Criteria: IBP • The OBI index is widely reported.

45. Assessment Criteria: IBP • The OBI index is widely reported.

46. Assessment Criteria: IBP • Countries have made good progress in improving their OBI scores. Yemen Liberia Uganda Rwanda Tanzania

47. Assessment Criteria: EITI • There are 11 countries that are EITI compliant.

48. Assessment Criteria: EITI • Tanzania has completed its first Reconciliation Report under EITI:

49. 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.

50. Assessment Criteria: Fiduciary • The TI index is widely reported every year.