Technical Articles

International Journal of Government Auditing – July 2009

Open Budget Survey Findings on SAIs and Independence

Eighty percent of the world’s governments fail to give their citizens the information they need to hold the governments accountable for managing their money. This troubling finding comes from an extensive new survey of government budget transparency in 85 countries issued in February 2009 by the International Budget Partnership (IBP). The survey also found that nearly 50 percent of the 85 countries IBP evaluated provide such minimal information that they are able to hide unpopular, wasteful, and corrupt spending.

IBP’s Open Budget Survey 2008 is an independent and comprehensive analysis that evaluates whether central governments give the public access to budget information and opportunities to participate in budget formulation, implementation, and evaluation processes. The survey also examines the ability of legislatures and supreme audit institutions (SAI) to hold their governments accountable.

The survey analyzed the results drawn from a rigorous questionnaire that reflects generally accepted good practices related to public finance management that international organizations have developed. These practices include the International Monetary Fund’s Code of Good Practices, the Organization for Economic Cooperation and Development’s Best Practices in Budget Transparency, and INTOSAI’s Lima Declaration. The survey was managed by IBP and implemented by independent researchers with budget expertise from civil society organizations and academic institutions established in the 85 countries examined.

 

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1 The IBP collaborates with civil society organizations in developing countries to analyze, monitor, and influence government budget processes, institutions, and outcomes. The partnership’s aim is to make budget systems more responsive to the needs of poor and low-income people in society and, accordingly, to make these systems more transparent and accountable to the public.

2 The following countries were included in the Open Budget Survey 2008: Afghanistan, Albania, Algeria, Angola, Argentina, Azerbaijan, Bangladesh, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cambodia, Cameroon, Chad, China, Colombia, Costa Rica, Croatia, the Czech Republic, the Democratic Republic of Congo, the Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Fiji, France, Georgia, Germany, Ghana, Guatemala, Honduras, India, Indonesia, Jordan, Kazakhstan, Kenya, the Kyrgyz Republic, Lebanon, Liberia, Macedonia, Malawi, Malaysia, Mexico, Mongolia, Morocco, Namibia, Nepal, New Zealand, Nicaragua, Niger, Nigeria, Norway, Pakistan, Papua New Guinea, Peru, the Philippines, Poland, Romania, Russia, Rwanda, São Tomé e Príncipe, Saudi Arabia, Senegal, Serbia, Slovenia, South Africa, South Korea, Sri Lanka, Sudan, Sweden, Tanzania, Thailand, Trinidad and Tobago, Turkey, Uganda, Ukraine, the United Kingdom, the United States, Venezuela, Vietnam, Yemen, and Zambia.

Survey Findings

  • The survey assessed SAIs according to the following key characteristics:
  • legal and financial independence from the executive,
  • comprehensiveness of audit mandate,
  • engagement with the public,
  • timeliness in reporting audit results, and
  • effectiveness of follow-up on audit recommendations.

Based on these assessments, an average score for SAI strength was calculated. The overall average score was 45 out of a possible 100.

The following sections analyze the key findings related to SAIs from the Open Budget Survey 2008.

Independence

Independence from the executive branch is one of the most important measures of an SAI’s ability to provide effective oversight. Legal and financial dependence on the executive may cause the head of an SAI to withhold reports that are critical of the executive.

In 26 of the countries surveyed, the executive can remove the SAI head from office without the consent of either the legislature or the judiciary. Further, in 38 of the 85 countries, the executive rather than the legislature or the judiciary determines the SAI’s yearly budget allocation. In 24 of these countries, the survey’s civil society researchers felt that funding for the SAI was below the level of resources the SAI needed to fulfill its mandate.

Further, in 21 countries in which the legislature (rather than the executive) determines the SAI’s yearly budget allocation, researchers felt that SAI budgets were not adequate to meet resource requirements.

In 31 of the 85 countries included in the survey, the SAI does not have full discretion in law to decide which audits it will undertake. In 13 of these 31 countries, SAIs have very limited or no discretion to decide which audits they will undertake.

Comprehensiveness

In 48 of the 85 surveyed countries, the SAI does not either release its audits of extrabudgetary funds (including oil stabilization funds) to the public, audit such funds, or release such reports within 24 months after the end of the fiscal year during which the audits were conducted. Although extrabudgetary funds are technically outside the budget, they are governmental in nature and thus should be subject to the same audit requirements as other government programs.

In 33 of the 85 countries, the SAI does not either employ designated staff assigned to audit security sector expenditures or undertake audits of the security sector. Because the public does not receive information on such secret programs, it is essential that legislators receive this information, including all audit reports on expenditures in the sector. SAIs should have staff with security clearances that give them access to all information related to secret expenditures.

Public Engagement

In 27 of the countries surveyed, audit reports are not made publicly available. Six of these countries do not produce audit reports.

In 44 of the countries, the SAI’s annual audit report does not include an executive summary. Since audit reports can be fairly technical documents, an executive summary of the report’s findings can help make the report more accessible to the media and the public.

It is, however, heartening that in many of the countries surveyed, the SAI has some procedures in place to tap the public as a source of information. In 46 countries surveyed, SAIs maintain formal mechanisms through which the public can register complaints and suggestions regarding the agencies, programs, or projects that citizens believe the SAI should audit. However, in 12 of these 46 countries, the SAI receives little or no information from the public on potential subjects for audit. This may suggest that the mechanisms the SAI established for soliciting public recommendations are inadequate or inconvenient.

Timeliness

Delays in releasing audit reports reduce the opportunities available to civil society and the public to use audit information to advocate for improvements in government performance. In 30 countries surveyed, the SAI either had not audited any expenditure or had not released such reports to the public within 2 years of the end of the fiscal year. In an additional 13 countries, the SAI completed its audits between 12 and 24 months after the end of the fiscal year. In only 15 countries surveyed did the SAI release its annual report within 6 months of the end of the fiscal year, as recommended by international good practice.

Effective Follow-up

SAIs’ mandates usually prevent them from playing a direct policy or political role. As a result, the legislature needs to follow up on an SAI findings and recommendations if SAI audits are to have practical impact. However, in 17 of the countries surveyed, the legislature did not follow up on the work of the SAI at all, while in an additional 20 countries, legislative follow-up was minimal.

Further, in 64 countries, the executive did not reveal what steps, if any, it had taken to address audit recommendations. In addition, neither the SAI nor the legislature reported to the public on actions the executive had taken to address audit recommendations in 64 countries. Failures to publicize actions taken in response to audit findings make it easier for governments to ignore audit recommendations.

 

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3 The 44 countries include the 27 countries where audit reports are not publicly available.

 

Conclusion and Recommendations

The survey results reveal that in most of the surveyed countries, several serious constraints undermined the oversight capacity of SAIs (and legislatures). Effective accountability depends not only on transparency (and the public’s access to budget information) but also on the strength of institutions like SAIs and legislatures. Unfortunately, the survey found that the countries with the weakest SAIs and legislatures were also the countries that had the least transparent budget systems. Thus, budget oversight in each of these countries was frustrated by both limited access to information and weak formal oversight institutions.

IBP offers two recommendations to assist SAIs in their oversight role. First, SAIs could begin to engage more closely with civil society organizations (CSO) and with the public. Such collaboration could bring more publicity to audit findings, build pressure on the executive to follow up on audit recommendations, bring new ideas and evidence for audit investigations, and increase the resources available for SAIs to use in conducting audits.

A recent example from Honduras illustrates these points. In 2007, the Honduran Tribunal Superior de Cuentas (the national SAI) began a pilot program to solicit greater public participation in its audits. Based on public input received at a public meeting, the SAI selected eight agencies—including hospitals, schools, and municipalities—to audit. Subsequently, the SAI sought and received public complaints about the functioning of these agencies, investigated these complaints, and incorporated its findings into its audit reports. The SAI organized a subsequent public meeting to discuss audit reports, and officials from the audited entities, who attended the meeting, were asked to respond to the audit findings. An assessment of the initiative found that public input led to a large number of the audit findings reported from these pilot audits—and that many of these findings would not have been identified through a regular audit investigation.

Second, the Joint Platform established during the XIX INCOSAI in Mexico could be used to document good practices in SAI-CSO collaboration that enhance oversight of government budgets. INTOSAI could then use the platform to encourage SAIs interested in replicating such good practices to begin pilot initiatives to collaborate with CSOs and assess the results of such collaboration.

IBP’s Open Budget Survey provided a broad analysis of SAI practices in 85 countries. The survey’s results provide a baseline of current SAI performance, including independence, the timeliness of reports, and the level of interaction with the public.

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4 Source: International Budget Partnership. See www.internationalbudget.org/resources/newsletter44.htm#Honduras.

5 At the XIX Congress in Mexico in 2007, INTOSAI established a joint platform with the United Nations Department of Economic and Social Affairs (UNDESA) and the International Budget Partnership to examine how SAIs can foster collaborative practices that will increase civil society participation in the audit process. More information on the Joint Platform is available in this Journal at http://www.intosaijournal.org/pdf/jan2008.pdf, p.22.

The results indicate that significant work is needed to ensure that SAIs are constituted within the institutional arrangements and perform within the standards set forth by the Lima Declaration. SAIs will be positioned to effectively hold their governments accountable only if they are able to attain these standards.

For more information on the IBP and on the Open Budget Initiative contact Vivek Ramkumar at ramkumar@cbpp.org or go to IBP’s Web sites: www.internationalbudget.org and www.openbudgetindex.org.

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